N-CSR 1 form.htm Unassociated Document
United States
Securities and Exchange Commission
Washington, D.C.  20549

Form N-CSR
Certified Shareholder Report of Registered Management Investment Companies




811-1

(Investment Company Act File Number)


Federated Stock and Bond Fund
_______________________________________________________________

(Exact Name of Registrant as Specified in Charter)



Federated Investors Funds
4000 Ericsson Drive
Warrendale, Pennsylvania 15086-7561
(Address of Principal Executive Offices)


(412) 288-1900
(Registrant's Telephone Number)


John W. McGonigle, Esquire
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
(Notices should be sent to the Agent for Service)






Date of Fiscal Year End: 11/30/2009


Date of Reporting Period:  11/30/2009







Item 1.                      Reports to Stockholders

Federated Stock and Bond Fund

Established 1934


ANNUAL SHAREHOLDER REPORT

November 30, 2009

Class A Shares
Class B Shares
Class C Shares
Class K Shares

FINANCIAL HIGHLIGHTS
SHAREHOLDER EXPENSE EXAMPLE
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
PORTFOLIO OF INVESTMENTS SUMMARY TABLES
PORTFOLIO OF INVESTMENTS
STATEMENT OF ASSETS AND LIABILITIES
STATEMENT OF OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
NOTES TO FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

BOARD OF TRUSTEES AND TRUST OFFICERS
EVALUATION AND APPROVAL OF ADVISORY CONTRACT
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
QUARTERLY PORTFOLIO SCHEDULE


Financial Highlights - Class A Shares

(For a Share Outstanding Throughout Each Period)

Year Ended November 30200920082007200612005
Net Asset Value, Beginning of Period$13.11$19.99$20.55$18.95$18.38
Income From Investment Operations:
Net investment income0.290.400.410.380.31
Net realized and unrealized gain (loss) on investments, futures contracts, swap contracts and foreign currency transactions2.52(4.91)1.421.930.56
TOTAL FROM INVESTMENT OPERATIONS2.81(4.51)1.832.310.87
Less Distributions:
Distributions from net investment income(0.27)(0.42)(0.40)(0.38)(0.30)
Distributions from net realized gain on investments, futures contracts, swap contracts and foreign currency transactions — (1.95)(1.99)(0.33) — 
TOTAL DISTRIBUTIONS(0.27)(2.37)(2.39)(0.71)(0.30)
Net Asset Value, End of Period$15.65$13.11$19.99$20.55$18.95
Total Return221.84%(25.39)%9.88%12.55%34.75%3,4
Ratios to Average Net Assets:
Net expenses1.25%51.25%51.25%51.17%51.16%5
Net investment income2.00%2.48%2.07%1.90%1.63%
Expense waiver/reimbursement60.26%0.19%0.10%0.12%0.08%
Supplemental Data:
Net assets, end of period (000 omitted)$149,696$125,373$195,687$198,289$234,204
Portfolio turnover254%190%135%106%50%
1Beginning with the year ended November 30, 2006, the Fund was audited by KPMG LLP. The previous year was audited by another independent registered public accounting firm.
2Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable.
3During the period, the Fund was reimbursed by an affiliated shareholder services provider, which had an impact of 0.01% and 0.02% on the total return for the years ended November 30, 2006 and 2005, respectively.
4During the period, the Fund was reimbursed by the Adviser, which had an impact of less than 0.01% on the total return.
5The net expense ratio is calculated without reduction for expense offset arrangements. The net expense ratios are 1.24%, 1.25%, 1.24%, 1.16% and 1.16% for the years ended November 30, 2009, 2008, 2007, 2006 and 2005 respectively, after taking into account these expense reductions.
6This expense decrease is reflected in both the net expense and the net investment income ratios shown above.
  • See Notes which are an integral part of the Financial Statements
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Financial Highlights - Class B Shares

(For a Share Outstanding Throughout Each Period)

Year Ended November 30200920082007200612005
Net Asset Value, Beginning of Period$13.09$19.96$20.52$18.93$18.36
Income From Investment Operations:
Net investment income0.150.260.250.200.14
Net realized and unrealized gain (loss) on investments, futures contracts, swap contracts and foreign currency transactions2.55(4.89)1.431.940.58
TOTAL FROM INVESTMENT OPERATIONS2.70(4.63)1.682.140.72
Less Distributions:
Distributions from net investment income(0.18)(0.29)(0.25)(0.22)(0.15)
Distributions from net realized gain on investments, futures contracts, swap contracts and foreign currency transactions — (1.95)(1.99)(0.33) — 
TOTAL DISTRIBUTIONS(0.18)(2.24)(2.24)(0.55)(0.15)
Net Asset Value, End of Period$15.61$13.09$19.96$20.52$18.93
Total Return220.86%(25.97)%9.05%11.59%3.95%3
Ratios to Average Net Assets:
Net expenses2.05%42.05%42.03%41.99%41.95%4
Net investment income1.23%1.72%1.31%1.07%0.84%
Expense waiver/reimbursement50.26%0.17%0.10%0.11%0.06%
Supplemental Data:
Net assets, end of period (000 omitted)$20,151$21,637$41,365$50,182$63,151
Portfolio turnover254%190%135%106%50%
1Beginning with the year ended November 30, 2006, the Fund was audited by KPMG LLP. The previous year was audited by another independent registered public accounting firm.
2Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable.
3During the period, the Fund was reimbursed by the Adviser, which had an impact of less than 0.01% on the total return.
4The net expense ratio is calculated without reduction for expense offset arrangements. The net expense ratios are 2.04%, 2.05%, 2.03%, 1.98% and 1.95% for the years ended November 30, 2009, 2008, 2007, 2006 and 2005 respectively, after taking into account these expense reductions.
5This expense decrease is reflected in both the net expense and the net investment income ratios shown above.
  • See Notes which are an integral part of the Financial Statements
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Financial Highlights - Class C Shares

(For a Share Outstanding Throughout Each Period)

Year Ended November 30200920082007200612005
Net Asset Value, Beginning of Period$13.04$19.90$20.47$18.88$18.31
Income From Investment Operations:
Net investment income0.180.260.260.220.17
Net realized and unrealized gain (loss) on investments, futures contracts, swap contracts and foreign currency transactions2.51(4.87)1.421.940.56
TOTAL FROM INVESTMENT OPERATIONS2.69(4.61)1.682.160.73
Less Distributions:
Distributions from net investment income(0.18)(0.30)(0.26)(0.24)(0.16)
Distributions from net realized gain on investments, futures contracts, swap contracts and foreign currency transactions — (1.95)(1.99)(0.33) — 
TOTAL DISTRIBUTIONS(0.18)(2.25)(2.25)(0.57)(0.16)
Net Asset Value, End of Period$15.55$13.04$19.90$20.47$18.88
Total Return220.86%(25.98)%9.05%11.69%3.98%3
Ratios to Average Net Assets:
Net expenses2.05%42.05%42.00%41.95%41.93%4
Net investment income1.18%1.66%1.30%1.11%0.88%
Expense waiver/reimbursement50.21%0.16%0.10%0.11%0.06%
Supplemental Data:
Net assets, end of period (000 omitted)$28,278$20,603$26,572$27,033$28,922
Portfolio turnover254%190%135%106%50%
1Beginning with the year ended November 30, 2006, the Fund was audited by KPMG LLP. The previous year was audited by another independent registered public accounting firm.
2Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable.
3During the period, the Fund was reimbursed by the Adviser, which had an impact of less than 0.01% on the total return.
4The net expense ratio is calculated without reduction for expense offset arrangements. The net expense ratios are 2.04%, 2.05%, 2.00%, 1.95% and 1.93% for the years ended November 30, 2009, 2008, 2007, 2006 and 2005 respectively, after taking into account these expense reductions.
5This expense decrease is reflected in both the net expense and the net investment income ratios shown above.
  • See Notes which are an integral part of the Financial Statements
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Financial Highlights - Class K Shares

(For a Share Outstanding Throughout Each Period)

Year Ended November 30200920082007200612005
Net Asset Value, Beginning of Period$13.13$20.02$20.57$18.98$18.40
Income From Investment Operations:
Net investment income0.260.300.330.280.25
Net realized and unrealized gain (loss) on investments, futures contracts, swap contracts and foreign currency transactions2.50(4.90)1.431.940.53
TOTAL FROM INVESTMENT OPERATIONS2.76(4.60)1.762.220.78
Less Distributions:
Distributions from net investment income(0.21)(0.34)(0.32)(0.30)(0.20)
Distributions from net realized gain on investments, futures contracts, swap contracts and foreign currency transactions — (1.95)(1.99)(0.33) — 
TOTAL DISTRIBUTIONS(0.21)(2.29)(2.31)(0.63)(0.20)
Net Asset Value, End of Period$15.68$13.13$20.02$20.57$18.98
Total Return221.30%(25.76)%9.44%11.98%4.27%3
Ratios to Average Net Assets:
Net expenses1.75%41.75%41.70%41.68%41.65%4
Net investment income1.41%1.93%1.55%1.42%1.31%
Expense waiver/reimbursement50.18%0.14%0.10%0.11%0.05%
Supplemental Data:
Net assets, end of period (000 omitted)$47,254$18,947$16,070$10,234$1,048
Portfolio turnover254%190%135%106%50%
1Beginning with the year ended November 30, 2006, the Fund was audited by KPMG LLP. The previous year was audited by another independent registered public accounting firm.
2Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable.
3During the period, the Fund was reimbursed by the Adviser, which had an impact of less than 0.01% on the total return.
4The net expense ratio is calculated without reduction for expense offset arrangements. The net expense ratios are 1.74%, 1.75%, 1.70%, 1.67% and 1.65% for the years ended November 30, 2009, 2008, 2007, 2006 and 2005 respectively, after taking into account these expense reductions.
5This expense decrease is reflected in both the net expense and the net investment income ratios shown above.

  • See Notes which are an integral part of the Financial Statements
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Shareholder Expense Example (unaudited)

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase or redemption payments; and (2) ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or shareholder services fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from June 1, 2009 to November 30, 2009.

ACTUAL EXPENSES

The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses attributable to your investment during this period.

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are required to be provided to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

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Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase or redemption payments. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Beginning
Account Value
6/1/2009
Ending
Account Value
11/30/2009
Expenses Paid
During Period1
Actual:
Class A Shares$1,000$1,139.50$6.70
Class B Shares$1,000$1,135.60$10.97
Class C Shares$1,000$1,135.30$10.97
Class K Shares$1,000$1,137.40$9.38
Hypothetical (assuming a 5% return
before expenses):
Class A Shares$1,000$1,018.80$6.33
Class B Shares$1,000$1,014.79$10.35
Class C Shares$1,000$1,014.79$10.35
Class K Shares$1,000$1,016.29$8.85
1Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half-year period). The annualized net expense ratios are as follows:
Class A Shares1.25%
Class B Shares2.05%
Class C Shares2.05%
Class K Shares1.75%
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Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Mutual fund performance changes over time and current performance may be lower or higher than what is stated. For current to the most recent month-end performance and after-tax returns, visit FederatedInvestors.com or call 1-800-341-7400.

Management's Discussion of Fund
Performance (unaudited)

For the fiscal year ended November 30, 2009, the Fund's Class A Shares, Class B Shares, Class C Shares and Class K Shares produced total returns of 21.84%, 20.86%, 20.86% and 21.30%, respectively, at net asset value. That compares with a 23.09% return for the Fund's Blended Index (as described below) and 26.15% for Morningstar's Moderate Allocation Funds Category Average.1 The Fund's Blended Index is comprised of 50% of the return of the Russell 3000 Index,2 10% of the return of the MSCI All Country World ex US Index3 and 40% of the return of the Barclays Capital U.S. Universal Index4 which had total returns of 27.17%, 46.44%, and 14.18%, respectively, during the reporting period. The Fund's total return for the fiscal year reflected actual cash flows, transaction costs and other expenses which were not reflected in the total return data of the indices.

The following discussion will focus on the performance of the Fund's
Class A Shares.

1 Morningstar's Moderate Allocation is the category of funds which seek to provide both capital appreciation and income by investing in stocks, bonds and cash. These funds typically invest between 50% to 70% of assets in equities and the remainder in fixed income and cash. Investments cannot be made in an average.
2 The Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market. The Russell 3000 Index is constructed to provide a comprehensive, unbiased, and stable barometer of the broad market and is completely reconstituted annually to ensure new and growing equities are reflected.
3 The MSCI ACWI (All Country World Index) ex-U.S. Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. As of June 2009 the MSCI ACWI consisted of 44 country indices comprising 22 developed and 22 emerging market country indices.
4 The Barclays Capital U.S. Universal Index represents the union of the U.S. Aggregate Index, U.S. Corporate High-Yield, Investment Grade 144A Index, Eurodollar Index, U.S. Emerging Markets Index, and the non-ERISA eligible portion of the CMBS Index. The index covers USD-denominated, taxable bonds that are rated either investment-grade or below investment-grade.
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MARKET OVERVIEW

Domestic Equities

Domestic equities, as measured by the S&P 500 Index5 (S&P 500), experienced substantial volatility throughout the reporting period. The fiscal year began with markets reeling from the fall-out caused by the failure of Lehman Brothers. With the credit crisis, the S&P 500 moved sharply lower, losing nearly 25% between the start of the fiscal year and the market bottom on March 9, 2009. In response to frozen credit markets, bank failures and rapidly deteriorating macroeconomic fundamentals, the Federal Reserve cut interest rates to a range between 0% and 0.25% at the December 16, 2008 Federal Open Market Committee meeting before eventually implementing a program of quantitative easing. Likewise, Congress supported the banking sector via the Troubled Asset Relief Program (TARP) while also passing a $787 billion stimulus plan. These measures, combined with aggressive cost cutting by corporations, led to better-than-expected earnings results in both the second and third quarters of 2009. As a result, the S&P 500 rallied 62% off of the March 9, 2009 low to finish the fiscal year up 22.25% (up 25.39% on a total return basis). Eight out of ten sectors posted positive returns. The three best-performing S&P 500 sectors were: Information Technology, 54.0%; Materials, 42.1%; and Consumer Discretionary, 39.8%. The three lagging sectors were: Telecommunication Services, (1.0)%; Utilities, (1.0)%; and Energy, 7.81%.

5The S&P 500 Index is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The index is unmanaged and, unlike the Fund, is not affected by cash flows. Investments cannot be made directly in an index.
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International Equities6

World markets followed a similar path as the United States. Equity markets experienced severe weakness in the opening months of the fiscal year, but rebounded as world governments enacted a wide range of economic bailout measures including the guaranteeing of bank deposits and money market investments, direct investment into financial institutions, nationalization of failing banks, direct purchases of commercial paper and economic stimulus plans. Several countries, including Iceland, Ukraine, Hungary, Belarus and Pakistan, bordered on collapse and required emergency International Monetary Fund bailout packages. As equity markets recovered, emerging markets outperformed significantly. With substantially less exposure to toxic assets, relatively benign debt levels and better demographic and macroeconomic fundamentals, investors poured into emerging markets. As such, the MSCI Emerging Markets Index7 finished the fiscal year with a return of 85.12%. Foreign currencies appreciated against the U.S. dollar in response to aggressive monetary policy and record fiscal deficits. The euro appreciated 18.3%, the sterling rose 6.9% and the yen gained 10.5% against the U.S. dollar during the reporting period.

Interest Rates

Interest rates were mixed over the reporting period, as shorter maturity yields fell while longer maturity yields rose. Long-term rates rose on increasing worries about a pickup of inflation on aggressive monetary easing. Spread bonds, on the other hand, performed well on expectations that credit-related bonds would do well in a growing economic environment.

The two-year Treasury yield fell 0.31% over the past 12 months and finished the reporting period at 0.66%, while the 30-year Treasury yield rose 0.76% in the period to finish at 4.19%. The yield to worst of the Barclay's Capital U.S. Aggregate Bond Index8 stood at 3.40% on November 30, 2009, compared to 4.96% 12 months earlier.

6 International investing involves special risks including currency risk, increased volatility of foreign securities, political risks and differences in auditing and other financial standards.
7 The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. As of June 2009, the MSCI Emerging Markets Index consisted of the following 22 emerging market country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey.
8 The Barclay's Capital U.S. Aggregate Bond Index is an unmanaged index composed of securities from the Barclay's Capital Government/Corporate Bond Index, Mortgage-Backed Securities Index and the Asset-Backed Securities Index. Total return comprises price appreciation/depreciation and income as a percentage of the original investment. Investments cannot be made directly in an index.
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Fund Performance

Asset Allocation Strategy Performance

For the reporting period, overall asset allocation strategy added to performance, primarily due to the Fund's successful domestic equity industry group weighting decisions. Likewise, the Fund also benefitted from global developed country allocation decisions. The main detractors from performance included the Fund's market capitalization allocation and the stock-versus-bond allocation. Despite strong absolute returns, U.S. small caps underperformed large caps for the fiscal year, thus detracting from relative performance. Additionally, markets faced severe shifts in macroeconomic fundamentals, and the Fund overweighted stocks too early in the cycle. The Fund was overweight equities at the beginning of the year, which negatively impacted performance as markets continued to sell-off before bottoming on March 9, 2009.

Domestic Equities Performance

In the equity portion of the Fund, a focus on high quality in a strong low quality rally was the primary driver of the Fund's relative underperformance.

The fund was most negatively impacted from stock selection in Consumer Discretionary, Health Care and Consumer Staples. The stocks that were the largest detractors from performance were:

●Cephalon Inc., a biopharmaceutical company which engages in the discovery, development, and commercialization of products for the central nervous system, inflammatory diseases, pain and oncology therapeutic areas. In general, health care stocks underperformed during the fiscal year as investors preferred more cyclical names during the stock market recovery. Uncertainties surrounding possible health care reform in the United States also affected the sector. Cephalon, Inc. was down 25.60% for the period.

●JetBlue Airways Corp., which provides passenger air transportation services in the United States. The stock was negatively impacted by a significant slowdown in consumer spending due to the credit and housing crises. For the reporting period, the stock lost 52.17%.

●Lowe's Companies, Inc., which, together with its subsidiaries, operates as a home improvement retailer in the United States and Canada. The firm was hurt by the precipitous decline in the real estate market as well as a sharp slowdown in consumer spending. The stock was down 24.96% over the reporting period.

On the positive side, the Fund benefitted from stock selection decisions in Energy, Materials and Financials. The stocks that aided relative performance included:

●The Goldman Sachs Group, Inc., a bank holding company, specializing in investment banking, trading and principal investments, asset management and securities services. The firm benefitted from being the first U.S. bank to repay TARP loans and was up 117.43% for the period.

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Petroleo Brasileiro SA, based in Brazil, explores for and produces oil and natural gas. The firm benefitted from a recovery in oil prices as well as its exposure to emerging markets. The stock was up 109.66% for the fiscal year.

●EMC Corp/Massachusetts, which provides enterprise storage systems, software, networks and services. The stock rallied as cyclical sectors, like information technology, led the recovery off of the March 9th lows. The stock was up 59.22% for the period.

Fixed-Income Performance9

The bond portion of the Fund outperformed its benchmark by a significant margin during the 12-month reporting period due mostly to sector management. Currency management had a very slight benefit. Duration10 management detracted from performance, and security selection in total had a slight negative impact on performance. Sector calls helped performance due to a considerable overweight in residential Mortgage Backed Securities, Commercial Mortgage-Backed Securities (CMBS), emerging markets and corporates (both investment-grade and high-yield corporates). Security selection was a significant positive for performance in the CMBS sector while the Federated Emerging Market Core Fund, The High Yield Bond Fund, and Federated Mortgage-Backed Securities Fund portfolios were a drag on performance. Security selection detracted from relative performance in the investment-grade sector. Union Central Life, Regional Diversified, Pacific Life and the Camp Pendelton bonds each underperformed in the past year, while the Textron Trust Preferred Securities, Prologis, AXA Financial and Enterprise Rent-A-Car were good performers, offsetting some of the drag from overall security selection.

9 Bond prices are sensitive to changes in interest rates and a rise in interest rates can cause a decline in their prices.
10 Duration is a measure of a security's price sensitivity to changes in interest rates. Securities with longer durations are more sensitive to changes in interest rates than securities of shorter durations.
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GROWTH OF A $10,000 INVESTMENT - CLASS A SHARES

The graph below illustrates the hypothetical investment of $10,0001 in Federated Stock and Bond Fund (Class A Shares) (the “Fund”) from October 31, 1999 to November 30, 2009, compared to a blend of indexes comprised of 50% of the Russell 3000 Index (RU3000)2, 10% of the MSCI All Country World ex US Index (MSCI ACWI ex US)2 and 40% of the Barclays Capital U.S. Universal Index (BCUSU)2 (the “Blended Index”),2 the Standard and Poor's 500 Index (S&P 500),2 the Barclays Capital Aggregate Bond Index (BCAB)2 and the Lipper Balanced Funds Average (LBFA).3

Average Annual Total Returns4 for the Period Ended 11/30/2009
1 Year 15.16%
5 Years2.16%
10 Years2.70%

Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Mutual fund performance changes over time and current performance may be lower or higher than what is stated. For current to the most recent month-end performance and after-tax returns, visit FederatedInvestors.com or call 1-800-341-7400. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Mutual funds are not obligations of or guaranteed by any bank and are not federally insured. Total returns shown include the maximum sales charge of 5.50%.

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1Represents a hypothetical investment of $10,000 in the Fund after deducting the maximum sales charge of 5.50% ($10,000 investment minus $550 sales charge = $9,450). The Fund's performance assumes the reinvestment of all dividends and distributions. The Blended Index, S&P 500, BCAB and LBFA have been adjusted to reflect reinvestment of dividends on securities in the indexes and the average.
2The Blended Index is a custom blended index comprised of the 50% of the RU3000, 10% of the MSCI ACWI ex US and 40% of the BCUSU. The RU3000 measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market. The Russell 3000 Index is constructed to provide a comprehensive, unbiased and stable barometer of the broad market and is completely reconstituted annually to ensure new and growing equities are reflected. The MSCI ACWI ex US is a free float-adjusted, market capitalization-weighted index that is designed to measure the equity market performance of developed and emerging markets. As of June 2009, the MSCI ACWI consisted of 44 country indices comprising 22 developed and 22 emerging market country indices. The BCUSU represents the union of the U.S. Aggregate Index, U.S. Corporate High-Yield, Investment Grade 144A Index, Eurodollar Index, U.S. Emerging Markets Index and the non-ERISA eligible portion of the CMBS Index. The index covers USD-denominated, taxable bonds that are rated either investment-grade or below investment-grade. The S&P 500 is an unmanaged, capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The BCAB is an unmanaged index composed of securities from the Barclay's Capital Government/Corporate Bond Index, Mortgage-Backed Securities Index and the Asset-Backed Securities Index. The RU3000, MSCI ACWI ex US, BCUSU, S&P 500 and BCAB are not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission (SEC) requires to be reflected in the Fund's performance. The indexes are unmanaged and, unlike the Fund, are not affected by cash flows. It is not possible to invest directly in an index.
3The LBFA represents the average of the total returns reported by all of the mutual funds designated by Lipper, Inc. as falling into the category indicated, and is not adjusted to reflect any sales charges. However, these total returns are reported net of expenses or other fees that the SEC requires to be reflected in the Fund's performance.
4Total returns quoted reflect all applicable sales charges.
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GROWTH OF A $10,000 INVESTMENT - CLASS B SHARES

The graph below illustrates the hypothetical investment of $10,0001 in Federated Stock and Bond Fund (Class B Shares) (the “Fund”) from October 31, 1999 to November 30, 2009, compared to a blend of indexes comprised of 50% of the Russell 3000 Index (RU3000)2, 10% of the MSCI All Country World ex US Index (MSCI ACWI ex US)2 and 40% of the Barclays Capital U.S. Universal Index (BCUSU)2 (the “Blended Index”),2 the Standard and Poor's 500 Index (S&P 500),2 the Barclays Capital Aggregate Bond Index (BCAB)2 and the Lipper Balanced Funds Average (LBFA).3

Average Annual Total Returns4 for the Period Ended 11/30/2009
1 Year 15.36%
5 Years2.19%
10 Years2.65%

Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Mutual fund performance changes over time and current performance may be lower or higher than what is stated. For current to the most recent month-end performance and after-tax returns, visit FederatedInvestors.com or call 1-800-341-7400. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Mutual funds are not obligations of or guaranteed by any bank and are not federally insured. Total returns shown include the maximum contingent deferred sales charge of 5.50%, as applicable.

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1Represents a hypothetical investment of $10,000 in the Fund. The maximum contingent deferred sales charge is 5.50% on any redemption of shares held up to one year from the purchase date. The Fund's performance assumes the reinvestment of all dividends and distributions. The Blended Index, S&P 500, BCAB and LBFA have been adjusted to reflect reinvestment of dividends on securities in the indexes and the average.
2The Blended Index is a custom blended index comprised of the 50% of the RU3000, 10% of the MSCI ACWI ex US and 40% of the BCUSU. The RU3000 measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market. The Russell 3000 Index is constructed to provide a comprehensive, unbiased and stable barometer of the broad market and is completely reconstituted annually to ensure new and growing equities are reflected. The MSCI ACWI ex US is a free float-adjusted, market capitalization-weighted index that is designed to measure the equity market performance of developed and emerging markets. As of June 2009, the MSCI ACWI consisted of 44 country indices comprising 22 developed and 22 emerging market country indices. The BCUSU represents the union of the U.S. Aggregate Index, U.S. Corporate High-Yield, Investment Grade 144A Index, Eurodollar Index, U.S. Emerging Markets Index and the non-ERISA eligible portion of the CMBS Index. The index covers USD-denominated, taxable bonds that are rated either investment-grade or below investment-grade. The S&P 500 is an unmanaged, capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The BCAB is an unmanaged index composed of securities from the Barclay's Capital Government/Corporate Bond Index, Mortgage-Backed Securities Index and the Asset-Backed Securities Index. The RU3000, MSCI ACWI ex US, BCUSU, S&P 500 and BCAB are not adjusted to reflect sales charges, expenses or other fees that the SEC requires to be reflected in the Fund's performance. The indexes are unmanaged and, unlike the Fund, are not affected by cash flows. It is not possible to invest directly in an index.
3The LBFA represents the average of the total returns reported by all of the mutual funds designated by Lipper, Inc. as falling into the category indicated, and is not adjusted to reflect any sales charges. However, these total returns are reported net of expenses or other fees that the SEC requires to be reflected in the Fund's performance.
4Total returns quoted reflect all applicable contingent deferred sales charges.
Annual Shareholder Report
15

GROWTH OF A $10,000 INVESTMENT - CLASS C SHARES

The graph below illustrates the hypothetical investment of $10,0001 in Federated Stock and Bond Fund (Class C Shares) (the “Fund”) from October 31, 1999 to November 30, 2009, compared to a blend of indexes comprised of 50% of the Russell 3000 Index (RU3000)2, 10% of the MSCI All Country World ex US Index (MSCI ACWI ex US)2 and 40% of the Barclays Capital U.S. Universal Index (BCUSU)2 (the “Blended Index”),2 the Standard and Poor's 500 Index (S&P 500),2 the Barclays Capital Aggregate Bond Index (BCAB)2 and the Lipper Balanced Funds Average (LBFA).3

Average Annual Total Returns4 for the Period Ended 11/30/2009
1 Year 19.86%
5 Years2.53%
10 Years2.50%

Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Mutual fund performance changes over time and current performance may be lower or higher than what is stated. For current to the most recent month-end performance and after-tax returns, visit FederatedInvestors.com or call 1-800-341-7400. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Mutual funds are not obligations of or guaranteed by any bank and are not federally insured. Total returns shown include the maximum contingent deferred sales charge of 1.00%, as applicable.

Annual Shareholder Report
16

1Represents a hypothetical investment of $10,000 in the Fund. A 1.00% contingent deferred sales charge would be applied on any redemption less than one year from the purchase date. The Fund's performance assumes the reinvestment of all dividends and distributions. The Blended Index, S&P 500, BCAB and the LBFA have been adjusted to reflect reinvestment of dividends on securities in the indexes and the average.
2The Blended Index is a custom blended index comprised of the 50% of the RU3000, 10% of the MSCI ACWI ex US and 40% of the BCUSU. The RU3000 measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market. The Russell 3000 Index is constructed to provide a comprehensive, unbiased and stable barometer of the broad market and is completely reconstituted annually to ensure new and growing equities are reflected. The MSCI ACWI ex US is a free float-adjusted, market capitalization-weighted index that is designed to measure the equity market performance of developed and emerging markets. As of June 2009, the MSCI ACWI consisted of 44 country indices comprising 22 developed and 22 emerging market country indices. The BCUSU represents the union of the U.S. Aggregate Index, U.S. Corporate High-Yield, Investment Grade 144A Index, Eurodollar Index, U.S. Emerging Markets Index and the non-ERISA eligible portion of the CMBS Index. The index covers USD-denominated, taxable bonds that are rated either investment-grade or below investment-grade. The S&P 500 is an unmanaged, capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The BCAB is an unmanaged index composed of securities from the Barclay's Capital Government/Corporate Bond Index, Mortgage-Backed Securities Index and the Asset-Backed Securities Index. The RU3000, MSCI ACWI ex US, BCUSU, S&P 500 and BCAB are not adjusted to reflect sales charges, expenses or other fees that the SEC requires to be reflected in the Fund's performance. The indexes are unmanaged and, unlike the Fund, are not affected by cash flows. It is not possible to invest directly in an index.
3The LBFA represents the average of the total returns reported by all of the mutual funds designated by Lipper, Inc. as falling into the category indicated, and is not adjusted to reflect any sales charges. However, these total returns are reported net of expenses or other fees that the SEC requires to be reflected in the Fund's performance.
4Total returns quoted reflect all applicable contingent deferred sales charges.
Annual Shareholder Report
17

GROWTH OF A $10,000 INVESTMENT - CLASS K SHARES

The Fund's Class K Shares commenced operations on April 8, 2003. The Fund offers four other classes of shares, Class A Shares, Class B Shares, Class C Shares and Institutional Shares. For the period prior to the commencement of operations of the Class K Shares, the performance information shown is for the Fund's Class A Shares, adjusted to reflect the expenses of Class K Shares. The graph below illustrates the hypothetical investment of $10,0001 in Federated Stock and Bond Fund (Class K Shares) (the “Fund”) from October 31, 1999 to November 30, 2009, compared to a blend of indexes comprised of 50% of the Russell 3000 Index (RU3000)2, 10% of the MSCI All Country World ex US Index (MSCI ACWI ex US)2 and 40% of the Barclays Capital U.S. Universal Index (BCUSU)2 (the “Blended Index”),2 the Standard and Poor's 500 Index (S&P 500),2 the Barclays Capital Aggregate Bond Index (BCAB)2 and the Lipper Balanced Funds Average (LBFA).3

Average Annual Total Returns for the Period Ended 11/30/2009
1 Year 21.30%
5 Years2.85%
10 Years2.82%

Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Mutual fund performance changes over time and current performance may be lower or higher than what is stated. For current to the most recent month-end performance and after-tax returns, visit FederatedInvestors.com or call 1-800-341-7400. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Mutual funds are not obligations of or guaranteed by any bank and are not federally insured.

Annual Shareholder Report
18

1Represents a hypothetical investment of $10,000 in the Fund. The Fund's performance assumes the reinvestment of all dividends and distributions. The Blended Index, S&P 500, BCAB and LBFA have been adjusted to reflect reinvestment of dividends on securities in the indexes and the average.
2The Blended Index is a custom blended index comprised of the 50% of the RU3000, 10% of the MSCI ACWI ex US and 40% of the BCUSU. The RU3000 measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market. The Russell 3000 Index is constructed to provide a comprehensive, unbiased and stable barometer of the broad market and is completely reconstituted annually to ensure new and growing equities are reflected. The MSCI ACWI ex US is a free float-adjusted, market capitalization-weighted index that is designed to measure the equity market performance of developed and emerging markets. As of June 2009, the MSCI ACWI consisted of 44 country indices comprising 22 developed and 22 emerging market country indices. The BCUSU represents the union of the U.S. Aggregate Index, U.S. Corporate High-Yield, Investment Grade 144A Index, Eurodollar Index, U.S. Emerging Markets Index and the non-ERISA eligible portion of the CMBS Index. The index covers USD-denominated, taxable bonds that are rated either investment-grade or below investment-grade. The S&P 500 is an unmanaged, capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The BCAB is an unmanaged index composed of securities from the Barclay's Capital Government/Corporate Bond Index, Mortgage-Backed Securities Index and the Asset-Backed Securities Index. The RU3000, MSCI ACWI ex US, BCUSU, S&P 500 and BCAB are not adjusted to reflect sales charges, expenses or other fees that the SEC requires to be reflected in the Fund's performance. The indexes are unmanaged and, unlike the Fund, are not affected by cash flows. It is not possible to invest directly in an index.
3The LBFA represents the average of the total returns reported by all of the mutual funds designated by Lipper, Inc. as falling into the category indicated, and is not adjusted to reflect any sales charges. However, these total returns are reported net of expenses or other fees that the SEC requires to be reflected in the Fund's performance.
Annual Shareholder Report
19

Portfolio of Investments Summary Tables (unaudited)

At November 30, 2009, the Fund's portfolio composition1 was as follows:

Portfolio CompositionPercentage of
Total Net Assets2
Domestic Equity Securities53.7%
Corporate Debt Securities11.8%
International Equity Securities7.2%
U.S. Treasury and Agency Securities5.8%
Mortgage-Backed Securities34.8%
Foreign Debt Securities1.6%
Asset-Backed Securities0.9%
Municipal Security40.0%
Derivative Contracts50.2%
Cash Equivalents614.8%
Other Assets and Liabilities — Net7(0.8)%
TOTAL 100%
1See the Fund's Prospectus and Statement of Additional Information for a description of these security types.
2As of the date specified above, the Fund owned shares of one or more affiliated investment companies. For purposes of this table, the affiliated investment company (other than an affiliated money market mutual fund) is not treated as a single portfolio security, but rather the Fund is treated as owning a pro rata portion of each security and each other asset and liability owned by the affiliated investment company. Accordingly, the percentages of total net assets shown in the table will differ from those presented on the Portfolio of Investments.
3For purposes of this table, Mortgage-Backed Securities include mortgage-backed securities guaranteed by Government Sponsored Entities and adjustable rate mortgage-backed securities.
4Represents less than 0.1%.
5Based upon net unrealized appreciation (depreciation) or value of the derivative contracts as applicable. Derivative contracts may consist of futures, forwards, options and swaps. The impact of a derivative contract on the Fund's performance may be larger than its unrealized appreciation (depreciation) or value may indicate. In many cases, the notional value or amount of a derivative contract may provide a better indication of the contract's significance to the portfolio. More complete information regarding the Fund's direct investments in derivative contracts, including unrealized appreciation (depreciation), value and notional values or amounts of such contracts, can be found in the table at the end of the Portfolio of Investments included in this report.
6Cash Equivalents include any investments in money market mutual funds and/or overnight repurchase agreements.
7Assets, other than investments in securities and derivative contracts, less liabilities. See Statement of Assets and Liabilities.
Annual Shareholder Report
20

At November 30, 2009, the Fund's sector composition8 was as follows:

Sector Composition of Equity HoldingsPercentage of
Equity Securities
Information Technology21.8%
Financials15.0%
Consumer Staples14.7%
Industrials11.3%
Energy8.7%
Materials8.7%
Health Care8.6%
Consumer Discretionary5.9%
Utilities5.3%
TOTAL100.0%
8Sector classifications are based upon, and individual portfolio securities are assigned to, the classifications of the Global Industry Classification Standard (GICS) except that the Adviser assigns a classification to securities not classified by the GICS and to securities for which the Adviser does not have access to the classification made by the GICS.
Annual Shareholder Report
21

Portfolio of Investments

November 30, 2009

Shares or
Principal
Amount
Value in
U.S. Dollars
Common Stocks – 37.7%
Consumer Discretionary – 2.2%
3,3921Apollo Group, Inc., Class A193,581
8,870Block (H&R), Inc.180,061
11,585Carnival Corp.371,068
11,5001Coach, Inc.399,625
9,400Dollar General Corp.216,200
10,4401Gymboree Corp.416,765
7,659International Game Technology144,679
1,0001Lear Corp.62,990
6,760Marriott International, Inc., Class A173,866
33,383McDonald's Corp.2,111,475
19,2981Starbucks Corp.422,626
5,084Starwood Hotels & Resorts162,790
5,402Target Corp.251,517
12,393Yum! Brands, Inc.437,101
TOTAL5,544,344
Consumer Staples – 5.6%
35,420Altria Group, Inc.666,250
10,956Archer-Daniels-Midland Co.337,554
15,221Avon Products, Inc.521,319
3,502Colgate-Palmolive Co.294,833
7,694ConAgra Foods, Inc.170,730
13,130General Mills, Inc.892,840
5,449Heinz (H.J.) Co.231,310
14,819Kellogg Co.779,183
2,846Kimberly-Clark Corp.187,751
25,378Kraft Foods, Inc., Class A674,547
17,337Kroger Co.394,243
2,845Lorillard, Inc.221,654
2,674Molson Coors Brewing Co., Class B120,892
11,114Nestle SA525,749
26,917PepsiCo, Inc.1,674,776
32,612Philip Morris International Inc.1,568,311
23,712Procter & Gamble Co.1,478,443
2,925Reynolds American, Inc.146,133
Annual Shareholder Report
22

Shares or
Principal
Amount
Value in
U.S. Dollars
39,758The Coca-Cola Co.2,274,158
11,540Wal-Mart Stores, Inc.629,507
TOTAL13,790,183
Energy – 3.3%
2,429Anadarko Petroleum Corp.144,598
4,948Apache Corp.471,446
3,100CONSOL Energy, Inc.142,352
3,250Chesapeake Energy Corp.77,740
22,479Chevron Corp.1,754,261
7,483ConocoPhillips387,395
2,216Devon Energy Corp.149,248
1,263EOG Resources, Inc.109,237
32,496Exxon Mobil Corp.2,439,475
4,529Halliburton Co.132,971
1,464Hess Corp.84,853
3,540Marathon Oil Corp.115,475
271NRG Energy, Inc.646
2,0801National-Oilwell, Inc.89,482
873Noble Energy, Inc.56,963
4,017Occidental Petroleum Corp.324,533
13,900Schlumberger Ltd.888,071
1,6921Southwestern Energy Co.74,380
3,207Spectra Energy Corp.62,248
2,9491Transocean Ltd.251,815
9,195XTO Energy, Inc.390,236
TOTAL8,147,425
Financials – 5.6%
2,845AON Corp.110,187
6,500Ace, Ltd.316,615
4,900Aflac, Inc.225,547
5,571Allstate Corp.158,272
11,712American Express Co.489,913
1,238Avalonbay Communities, Inc.89,433
1,136BB&T Corp.28,286
111,252Bank of America Corp.1,763,344
2,137Boston Properties, Inc.143,136
663CME Group, Inc.217,616
Annual Shareholder Report
23

Shares or
Principal
Amount
Value in
U.S. Dollars
4,381Capital One Financial Corp.168,055
3,583Chubb Corp.179,652
134,849Citigroup, Inc.554,229
4,231Equity Residential Properties Trust136,280
1,341Fifth Third Bancorp13,517
1,486Franklin Resources, Inc.160,533
8,155Goldman Sachs Group, Inc.1,383,577
4,471HCP Inc.139,942
3,974Hartford Financial Services Group, Inc.97,204
1,832Health Care REIT, Inc.81,616
9,478Host Hotels & Resorts, Inc.99,709
834Hudson City Bancorp, Inc.11,084
55,088J.P. Morgan Chase & Co.2,340,689
3,208Lincoln National Corp.73,495
3,699Loews Corp.131,019
5,472Marsh & McLennan Cos., Inc.123,394
8,744MetLife, Inc.298,957
13,754Morgan Stanley434,351
789PNC Financial Services Group44,981
3,343Principal Financial Group84,879
6,976Progressive Corp. Ohio116,988
6,750Prologis Trust88,290
4,722Prudential Financial235,392
2,086Public Storage166,004
2,073Regions Financial Corp.12,148
9,599Schwab (Charles) Corp.175,950
4,339Simon Property Group, Inc.315,272
4,937State Street Corp.203,898
867SunTrust Banks, Inc.20,487
8,700T. Rowe Price Group, Inc.425,691
12,010The Bank of New York Mellon Corp.319,946
15,372The Travelers Cos, Inc.805,339
19,306U.S. Bancorp465,854
3,434Unum Group65,383
2,390Ventas, Inc.102,603
2,383Vornado Realty Trust155,991
Annual Shareholder Report
24

Shares or
Principal
Amount
Value in
U.S. Dollars
8,168Wells Fargo & Co.229,031
TOTAL14,003,779
Health Care – 3.2%
17,094Abbott Laboratories931,452
3,651Aetna, Inc.106,281
3,0091Amgen, Inc.169,557
819Bard (C.R.), Inc.67,330
11,086Baxter International, Inc.604,741
2,002Becton, Dickinson & Co.149,750
12,5471Boston Scientific Corp.105,018
5,753Bristol-Myers Squibb Co.145,608
2,292CIGNA Corp.73,527
2,993Cardinal Health, Inc.96,464
1,3521Celgene Corp.74,968
4,6001Cephalon, Inc.252,770
2,2261Express Scripts, Inc., Class A190,991
2,6231Gilead Sciences, Inc.120,789
1,4551Humana, Inc.60,397
3191Intuitive Surgical, Inc.89,492
16,378Johnson & Johnson1,029,194
9041Laboratory Corp. of America Holdings65,956
2,922Lilly (Eli) & Co.107,325
2,208McKesson HBOC, Inc.136,940
3,9031Medco Health Solutions, Inc.246,514
9,232Medtronic, Inc.391,806
18,731Merck & Co., Inc.678,234
52,157Pfizer, Inc.947,693
1,311Quest Diagnostics, Inc.75,959
2,8861St. Jude Medical, Inc.105,945
2,341Stryker Corp.117,986
1,1961Thermo Fisher Scientific Inc.56,487
16,935UnitedHealth Group, Inc.485,527
3,9441Wellpoint, Inc.213,094
1,8091Zimmer Holdings, Inc.107,039
TOTAL8,004,834
Industrials – 4.3%
9,2303M Co.714,771
Annual Shareholder Report
25

Shares or
Principal
Amount
Value in
U.S. Dollars
682Avery Dennison Corp.25,616
5,967Boeing Co.312,730
1,594Burlington Northern Santa Fe156,690
1,021C.H. Robinson Worldwide, Inc.56,911
2,385CSX Corp.113,240
9,313Caterpillar, Inc.543,786
784Cintas Corp.22,023
1,628Cummins, Inc.73,097
2,135Danaher Corp.151,414
3,448Deere & Co.184,503
1,250Donnelley (R.R.) & Sons Co.25,725
314Dun & Bradstreet Corp.24,677
1,343Eaton Corp.85,818
6,175Emerson Electric Co.255,707
5,468FedEx Corp.461,773
7,399Fluor Corp.314,310
3,175General Dynamics Corp.209,233
115,521General Electric Co.1,850,646
6,197Honeywell International, Inc.238,399
1,504ITT Corp.77,787
3,172Illinois Tool Works, Inc.154,286
1,0951Iron Mountain, Inc.26,280
2,674Lockheed Martin Corp.206,513
15,283Norfolk Southern Corp.785,546
2,619Northrop Grumman Corp.143,521
3,011PACCAR, Inc.111,648
1,280Pitney Bowes, Inc.29,491
1,165Precision Castparts Corp.120,787
15,253Raytheon Co.785,987
1,962Republic Services, Inc.55,328
920Robert Half International, Inc.20,544
5241Stericycle, Inc.28,679
13,535Tyco International Ltd.485,500
3,111Union Pacific Corp.196,802
6,075United Parcel Service, Inc.349,130
16,064United Technologies Corp.1,080,143
Annual Shareholder Report
26

Shares or
Principal
Amount
Value in
U.S. Dollars
2,941Waste Management, Inc.96,582
TOTAL10,575,623
Information Technology – 8.2%
6,1551Adobe Systems, Inc.215,917
6,041Altera Corp.127,042
5,949Analog Devices, Inc.178,411
5,9471Apple, Inc.1,188,865
27,230Applied Materials, Inc.335,201
5,798Automatic Data Processing, Inc.251,923
26,1751Broadcom Corp.764,310
4,681CA, Inc.103,450
49,1341Cisco Systems, Inc.1,149,736
3,4161Cognizant Technology Solutions Corp.150,065
7,967Corning, Inc.132,890
8,8051Dell, Inc.124,327
18,1181EMC Corp. Mass304,926
13,0521eBay, Inc.319,383
4,0331Google Inc.2,351,239
24,517Hewlett-Packard Co.1,202,804
129,232Intel Corp.2,481,254
12,049International Business Machines Corp.1,522,391
3,7821Intuit, Inc.110,472
4,558Linear Technology Corp.122,929
1,109Mastercard, Inc. Class A267,114
3,8001McAfee, Inc.144,970
17,9451Micron Technology, Inc.134,946
108,904Microsoft Corp.3,202,867
11,158Motorola, Inc.89,376
11,1681NVIDIA Corp.145,854
45,828Oracle Corp.1,011,882
3,764Paychex, Inc.118,001
17,596Qualcomm, Inc.791,820
9,6341Symantec Corp.171,004
25,970Texas Instruments, Inc.656,781
8,044Western Union Co.148,412
5,702Xilinx, Inc.129,093
Annual Shareholder Report
27

Shares or
Principal
Amount
Value in
U.S. Dollars
14,0551Yahoo, Inc.210,403
TOTAL20,360,058
Materials – 3.3%
4,309Air Products & Chemicals, Inc.357,345
20,182Alcoa, Inc.252,679
2,654BHP Billiton LTD — SPON ADR199,846
1,972Ball Corp.97,437
13,802Barrick Gold Corp.589,207
23,460Dow Chemical Co.651,719
18,549Du Pont (E.I.) de Nemours & Co.641,425
4,922Ecolab, Inc.221,047
8,425Freeport-McMoRan Copper & Gold, Inc.697,590
8,902International Paper Co.226,556
11,185Monsanto Co.903,189
10,187Newmont Mining Corp.546,431
6,693Nucor Corp.283,850
3,5671Owens-Illinois, Inc.111,540
3,366PPG Industries, Inc.200,041
3,600Potash Corp. of Saskatchewan, Inc.404,712
13,039Praxair, Inc.1,069,589
2,491Sigma-Aldrich Corp.132,870
6,382United States Steel Corp.285,020
2,552Vulcan Materials Co.123,721
4,365Weyerhaeuser Co.169,973
TOTAL8,165,787
Utilities – 2.0%
9,1811AES Corp.116,966
3,276Ameren Corp.85,143
6,582American Electric Power Co., Inc.211,875
3,754Consolidated Edison Co.161,084
2,714Constellation Energy Group86,359
2,287DTE Energy Co.91,732
8,137Dominion Resources, Inc.296,024
17,986Duke Energy Corp.300,006
1,819EQT Corp.74,852
4,492Edison International152,953
2,695Entergy Corp.211,962
Annual Shareholder Report
28

Shares or
Principal
Amount
Value in
U.S. Dollars
9,230Exelon Corp.444,701
5,702FPL Group, Inc.296,333
4,303FirstEnergy Corp.185,373
5,081P G & E Corp.215,130
5,217PPL Corp.159,223
12,016Progress Energy, Inc.469,705
7,066Public Service Enterprises Group, Inc.221,590
2,411Questar Corp.95,644
3,518Sempra Energy186,947
23,859Southern Co.765,635
6,340Xcel Energy, Inc.128,829
TOTAL4,958,066
TOTAL COMMON STOCKS
(IDENTIFIED COST $82,604,297)
93,550,099
Asset-Backed Securities – 0.9%
$19,0752,3125 Home Loan Owner Trust 1998-1A B1, 9.76%, 2/15/202915,832
250,000Banc of America Commercial Mortgage, Inc. 2007-4 A4, 5.935%, 2/10/2051212,926
800,000Citigroup/Deutsche Bank Commercial Mortgage 2007-CD5, Series 2007-CD5, 5.886%, 11/15/2044685,544
350,000LB-UBS Commercial Mortgage Trust 2008-C1 A2, 6.318%, 4/15/2041330,831
100,000Merrill Lynch Mortgage Trust 2008-C1 AM, 6.461%, 2/12/205170,311
400,000Merrill Lynch/Countrywide Commercial Mortgage 2007-6, Series 2007-6, 5.485%, 03/12/2051331,479
315,000Morgan Stanley Capital I 2006-IQ12 A4, 5.332%, 12/15/2043302,060
250,000Morgan Stanley Capital, Inc. A4, 6.076%, 6/11/2049209,319
TOTAL ASSET-BACKED SECURITIES
(IDENTIFIED COST $2,441,592)
2,158,302
Collateralized Mortgage Obligations – 0.3%
800,000Citigroup/Deutsche Bank Commercial Mortgage 2007-CD4 A3, 5.293%, 12/11/2049757,438
5,7432,3SMFC Trust Asset-Backed Certificates, 1997-A B1-4, 7.719%, 1/28/20273,446
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(IDENTIFIED COST $816,269)
760,884
Corporate Bonds – 6.9%
Basic Industry@0018Chemicals – 0.1%
95,000Dow Chemical Co., Note, 8.550%, 05/15/2019112,540
40,000Du Pont (E.I.) de Nemours & Co., 5.000%, 01/15/201343,595
Annual Shareholder Report
29

Shares or
Principal
Amount
Value in
U.S. Dollars
$100,000Praxair, Inc., 4.625%, 03/30/2015109,661
35,000Rohm & Haas Co., 6.000%, 09/15/201736,472
TOTAL302,268
Basic Industry@0018Metals & Mining – 0.3%
80,000Alcan, Inc., 5.000%, 06/01/201583,583
70,000Alcoa, Inc., Note, 5.550%, 02/01/201770,434
90,000Allegheny Technologies, Inc., Sr. Note, 9.375%, 06/01/2019103,800
10,000BHP Finance (USA), Inc., 6.500%, 04/01/201911,761
200,000Barrick Gold Corp., 6.950%, 04/01/2019234,034
120,000Newmont Mining Corp., Company Guarantee, 5.875%, 04/01/2035114,233
120,000Rio Tinto Finance USA Ltd., 5.875%, 07/15/2013130,631
100,0002,3Xstrata Finance Canada Ltd., Unsecd. Note, 5.500%, 11/16/2011104,629
TOTAL853,105
Basic Industry@0018Paper – 0.1%
30,000International Paper Co., Sr. Unsecd. Note, 7.500%, 08/15/202133,607
20,000Louisiana-Pacific Corp., 8.875%, 08/15/201020,500
150,000Pope & Talbot, Inc., 8.375%, 6/1/20131,388
100,000Weyerhaeuser Co., Deb., 7.375%, 03/15/203291,524
TOTAL147,019
Capital Goods@0018Aerospace & Defense – 0.1%
50,0002,3BAE Systems Holdings, Inc., 5.200%, 08/15/201554,129
100,000Boeing Co., 4.875%, 02/15/2020104,249
25,000Lockheed Martin Corp., Sr. Note, 4.121%, 03/14/201326,583
TOTAL184,961
Capital Goods@0018Building Materials – 0.0%
50,000RPM International, Inc., 6.500%, 02/15/201851,873
40,000RPM International, Inc., Sr. Unsecd. Note, 6.125%, 10/15/201940,917
TOTAL92,790
Capital Goods@0018Diversified Manufacturing – 0.2%
20,000Dover Corp., Note, 5.450%, 03/15/201821,944
70,000Emerson Electric Co., 4.875%, 10/15/201974,517
68,0002,3Hutchison Whampoa International Ltd., 6.500%, 02/13/201375,145
100,000Roper Industries, Inc., Sr. Unsecd. Note, 6.250%, 09/01/2019107,109
90,0002,3Textron Financial Corp., Jr. Sub. Note, 6.000%, 02/15/206763,450
50,000Thomas & Betts Corp., Note, 7.250%, 06/01/201351,211
TOTAL393,376
Annual Shareholder Report
30

Shares or
Principal
Amount
Value in
U.S. Dollars
Capital Goods@0018Environmental – 0.1%
$110,0002,3Republic Services, Inc., Sr. Unsecd. Note, Series 144A, 5.500%, 09/15/2019115,496
25,000Waste Management, Inc., 7.375%, 03/11/201929,255
TOTAL144,751
Capital Goods@0018Packaging – 0.0%
40,000Pactiv Corp., 6.400%, 01/15/201842,324
Communications@0018Media & Cable – 0.2%
27,000Comcast Cable Communications Holdings, Company Guarantee, 8.375%, 03/15/201331,678
100,000Comcast Corp., 7.050%, 03/15/2033110,284
100,000Comcast Corp., Company Guarantee, 6.500%, 01/15/2017111,995
120,000Time Warner Cable, Inc., Company Guarantee, 6.750%, 06/15/2039127,863
20,000Time Warner Cable, Inc., Company Guarantee, 8.250%, 04/01/201924,456
50,000Time Warner Cable, Inc., Company Guarantee, 8.750%, 02/14/201962,492
50,000Time Warner Cable, Inc., Sr. Unsecd. Note, 5.850%, 05/01/201753,530
TOTAL522,298
Communications@0018Media Noncable – 0.1%
120,000News America Holdings, Inc., Sr. Deb., 9.250%, 02/01/2013142,238
90,0002,3News America, Inc., 5.650%, 08/15/202095,528
TOTAL237,766
Communications@0018Telecom Wireless – 0.2%
130,000AT&T Wireless Services, Inc., 8.750%, 03/01/2031172,447
90,000America Movil S.A.B. de C.V., Note, 5.750%, 01/15/201597,058
20,000Vodafone Group PLC, 5.350%, 02/27/201221,569
90,000Vodafone Group PLC, Note, 5.625%, 02/27/201798,781
TOTAL389,855
Communications@0018Telecom Wirelines – 0.2%
15,000CenturyTel, Inc., Sr. Note, 6.150%, 09/15/201915,480
150,000Deutsche Telekom International Finance BV, 4.875%, 07/08/2014160,810
45,000France Telecom SA, Sr. Unsecd. Note, 5.375%, 07/08/201949,262
100,000Telefonica SA, Sr. Note, 5.855%, 02/04/2013110,536
40,000Verizon Communications, Inc., 6.100%, 04/15/201844,419
50,000Verizon Communications, Inc., Sr. Unsecd. Note, 6.350%, 04/01/201956,387
TOTAL436,894
Consumer Cyclical@0018Automotive – 0.0%
70,000DaimlerChrysler North America Holding Corp., 6.500%, 11/15/201376,954
Annual Shareholder Report
31

Shares or
Principal
Amount
Value in
U.S. Dollars
Consumer Cyclical@0018Entertainment – 0.2%
$80,000International Speedway Corp., 5.400%, 04/15/201484,030
280,000Time Warner, Inc., Company Guarantee, 6.875%, 05/01/2012310,443
TOTAL394,473
Consumer Cyclical@0018Lodging – 0.0%
50,000Wyndham Worldwide Corp., Sr. Unsecd. Note, 6.000%, 12/01/201646,652
Consumer Cyclical@0018Retailers – 0.2%
187,2742,3CVS Caremark Corp., Pass Thru Cert., 5.298%, 01/11/2027180,772
60,000Costco Wholesale Corp., 5.300%, 03/15/201265,318
20,000JC Penney Corp., Inc., Sr. Unsecd. Note, 5.750%, 02/15/201819,000
70,000Target Corp., Note, 5.875%, 07/15/201678,367
40,000Wal-Mart Stores, Inc., 6.200%, 04/15/203845,474
TOTAL388,931
Consumer Non-Cyclical@0018Food/Beverage – 0.3%
90,0002,3Bacardi Ltd., Sr. Note, 7.450%, 04/01/2014103,840
70,000Bottling Group LLC, Note, 5.500%, 04/01/201678,462
30,000Coca-Cola Enterprises, Inc., 4.250%, 03/01/201532,221
80,000Diageo Capital PLC, Company Guarantee, 7.375%, 01/15/201494,355
60,000General Mills, Inc., Note, 5.700%, 02/15/201766,756
125,000Kraft Foods, Inc., Note, 5.250%, 10/01/2013134,989
100,000Kraft Foods, Inc., Sr. Unsecd. Note, 6.125%, 02/01/2018108,056
50,000PepsiCo, Inc., 4.650%, 02/15/201354,311
30,0002,3Ralcorp Holdings, Inc., Sr. Note, 6.625%, 8/15/203931,113
15,000Sysco Corp., Sr. Note, 5.375%, 03/17/201916,644
TOTAL720,747
Consumer Non-Cyclical@0018Health Care – 0.0%
20,000Express Scripts, Inc., Sr. Unsecd. Note, 7.25%, 6/15/201923,606
75,000Quest Diagnostics, Inc., Sr. Unsecd. Note, 6.400%, 07/01/201782,540
TOTAL106,146
Consumer Non-Cyclical@0018Pharmaceuticals – 0.1%
40,000Abbott Laboratories, 5.150%, 11/30/201244,555
100,000Genentech, Inc., Note, 4.750%, 07/15/2015110,407
80,000Pfizer, Inc., Sr. Unsecd. Note, 6.200%, 03/15/201992,300
TOTAL247,262
Consumer Non-Cyclical@0018Products – 0.0%
45,000Philips Electronics NV, 5.750%, 03/11/201849,500
Consumer Non-Cyclical@0018Supermarkets – 0.0%
25,000Kroger Co., Bond, 6.900%, 04/15/203829,611
Annual Shareholder Report
32

Shares or
Principal
Amount
Value in
U.S. Dollars
Consumer Non-Cyclical@0018Tobacco – 0.0%
$70,000Altria Group, Inc., 9.250%, 08/06/201985,621
Energy@0018Independent – 0.1%
120,000Canadian Natural Resources Ltd., 4.900%, 12/01/2014128,889
30,000EOG Resources, Inc., Note, 5.625%, 06/01/201933,510
25,000Pemex Project Funding Master, 5.750%, 12/15/201526,117
80,0002,3Petroleos Mexicanos, 4.875%, 03/15/201581,164
20,000XTO Energy, Inc., 6.750%, 08/01/203722,562
25,000XTO Energy, Inc., Sr. Unsecd. Note, 6.250%, 08/01/201727,872
TOTAL320,114
Energy@0018Integrated – 0.1%
60,000Conoco, Inc., Sr. Note, 6.950%, 04/15/202970,613
100,000ConocoPhillips Australia Funding Co., 5.500%, 04/15/2013110,391
35,000Petro-Canada, Deb., 7.000%, 11/15/202838,262
33,3402,3Qatar Petroleum, 5.579%, 05/30/201134,423
100,0002,3StatoilHydro ASA, 5.125%, 4/30/2014110,817
TOTAL364,506
Energy@0018Oil Field Services – 0.0%
50,000Noble Drilling Corp., Sr. Note, 7.5%, 3/15/201956,222
25,000Weatherford International Ltd., 6.000%, 03/15/201826,154
20,000Weatherford International Ltd., 7.000%, 03/15/203821,127
TOTAL103,503
Energy@0018Refining – 0.1%
110,000Premcor Refining Group, Inc., 6.125%, 05/01/2011116,219
25,000Valero Energy Corp., 9.375%, 03/15/201930,141
TOTAL146,360
Financial Institution@0018Banking – 1.0%
50,000Bank of America Corp., Sr. Note, 5.375%, 06/15/201452,771
120,000Bank of America Corp., Sr. Note, 7.375%, 5/15/2014135,026
100,0002,3Barclays Bank PLC, 5.926%, 12/31/204972,500
70,000Capital One Financial Corp., Sr. Note, 7.375%, 05/23/201480,615
80,000Citigroup, Inc., Note, 5.125%, 05/05/201481,493
60,0002,3Commonwealth Bank of Australia, Sr. Unsecd. Note, Series 144A, 3.750%, 10/15/201461,534
200,000First Union Institutional, Bond, 8.04%, 12/1/2026195,000
50,000Goldman Sachs Group, Inc., 6.125%, 02/15/203351,838
150,000Goldman Sachs Group, Inc., Sr. Note, 6.150%, 04/01/2018162,702
320,000Goldman Sachs Group, Inc., Sr. Unsecd. Note, 5.125%, 01/15/2015340,298
Annual Shareholder Report
33

Shares or
Principal
Amount
Value in
U.S. Dollars
$100,000HSBC Finance Capital Trust IX, Note, 5.911%, 11/30/203578,500
100,000HSBC Finance Corp., 5.000%, 06/30/2015104,785
75,000Household Finance Corp., Unsecd. Note, 4.75%, 7/15/201378,608
90,000M & T Bank Corp., 5.375%, 05/24/201294,263
30,000Merrill Lynch & Co., Inc., Sr. Unsecd. Note, 6.050%, 08/15/201232,388
100,000Morgan Stanley Group, Inc., 5.300%, 03/01/2013106,804
100,000Morgan Stanley, Sr. Unsecd. Note, 6.625%, 04/01/2018109,185
30,000Northern Trust Corp., 4.625%, 05/01/201432,756
15,000PNC Funding Corp., Sub. Note, 5.625%, 02/01/201715,241
472,6502,3Regional Diversified Funding, 9.250%, 03/15/2030254,309
20,000State Street Corp., Sr. Note, 4.300%, 05/30/201421,313
100,000U.S. Bank, N.A., 6.300%, 02/04/2014113,490
140,000Wachovia Corp., 5.750%, 02/01/2018147,946
40,000Wilmington Trust Corp., Sub. Note, 8.500%, 04/02/201839,886
TOTAL2,463,251
Financial Institution@0018Brokerage – 0.3%
220,000Blackrock, Inc., 6.250%, 09/15/2017243,718
50,000Charles Schwab Corp., Sr. Unsecd. Note, 4.950%, 06/01/201454,232
40,000Eaton Vance Corp., 6.500%, 10/02/201743,214
100,0002,3FMR LLC, 4.75%, 3/01/2013101,889
25,000Janus Capital Group, Inc., Sr. Note, 6.500%, 06/15/201225,284
30,000Janus Capital Group, Inc., Sr. Note, 6.950%, 06/15/201728,936
95,000Jefferies Group, Inc., Sr. Unsecd. Note, 8.500%, 07/15/2019104,481
60,000Lehman Brothers Holdings, Note, 4.8%, 3/13/201412,000
30,000Nuveen Investments, 5.500%, 09/15/201520,700
30,000Nuveen Investments, 5%, 9/15/201029,737
75,000Raymond James Financial, Inc., 8.600%, 08/15/201983,381
TOTAL747,572
Financial Institution@0018Finance Noncaptive – 0.5%
160,000American Express Co., Sr. Unsecd. Note, 8.125%, 05/20/2019192,674
60,000American Express Credit Corp., Sr. Unsecd. Note, 5.125%, 08/25/201463,869
100,000American International Group, Inc., Sr. Note, 4.700%, 10/01/201099,062
120,000Berkshire Hathaway, Inc., Company Guarantee, 5.000%, 08/15/2013131,625
120,000Capital One Capital IV, 6.745%, 02/17/203795,400
20,000Capital One Capital V, 10.250%, 08/15/203922,055
510,000General Electric Capital Corp., 5.625%, 05/01/2018531,737
30,000General Electric Capital Corp., Note, Series MTN, 6.750%, 03/15/203231,377
Annual Shareholder Report
34

Shares or
Principal
Amount
Value in
U.S. Dollars
$80,000International Lease Finance Corp., 4.875%, 09/01/201077,650
30,0002,3Macquarie Group Ltd., Note, Series 144A, 7.625%, 8/13/201932,863
TOTAL1,278,312
Financial Institution@0018Insurance@0018Health – 0.1%
50,000CIGNA Corp., 6.350%, 03/15/201850,882
50,000UnitedHealth Group, Inc., Bond, 6.000%, 02/15/201853,314
50,000Wellpoint, Inc., 5.850%, 01/15/203648,994
TOTAL153,190
Financial Institution@0018Insurance@0018Life – 0.6%
100,000AXA-UAP, Sub. Note, 8.600%, 12/15/2030116,609
100,0002,3Massachusetts Mutual Life Insurance Co., Sub. Note, 8.875%, 06/01/2039123,886
90,000MetLife, Inc., 6.750%, 06/01/2016103,442
10,000MetLife, Inc., Jr. Sub. Note, 10.750%, 08/01/206912,183
80,0002,3New York Life Insurance Co., Sub. Note, 6.750%, 11/15/203980,979
300,0002,3Pacific LifeCorp., Bond, 6.600%, 09/15/2033255,635
50,000Prudential Financial, Inc., 5.150%, 01/15/201352,992
40,000Prudential Financial, Inc., 6.625%, 12/01/203741,409
10,000Prudential Financial, Inc., Sr. Note, 7.375%, 06/15/201911,380
100,000Prudential Financial, Inc., Sr. Unsecd. Note, 4.750%, 09/17/2015102,366
750,0002Union Central Life Ins Co, Note, 8.2%, 11/1/2026704,991
TOTAL1,605,872
Financial Institution@0018Insurance@0018P&C – 0.2%
80,000ACE INA Holdings, Inc., Sr. Note, 5.700%, 02/15/201787,365
80,000CNA Financial Corp., 6.500%, 08/15/201679,590
15,000Chubb Corp., Sr. Note, 5.750%, 05/15/201816,661
50,000Horace Mann Educators Corp., Sr. Note, 6.850%, 04/15/201650,302
100,0002,3Liberty Mutual Group, Inc., Unsecd. Note, 5.750%, 03/15/2014101,028
30,0002,3Nationwide Mutual Insurance Co., Note, Series 144A, 9.375%, 08/15/203931,367
10,000The Travelers Cos., Inc., Sr. Unsecd. Note, 5.500%, 12/01/201511,198
TOTAL377,511
Financial Institution@0018REITs – 0.2%
45,000Avalonbay Communities, Inc., Sr. Unsecd. Note, Series MTN, 5.700%, 03/15/201747,139
75,000Boston Properties LP, Sr. Unsecd. Note, 5.875%, 10/15/201977,151
40,000Equity One, Inc., Bond, 6.000%, 09/15/201736,966
40,000Liberty Property LP, 6.625%, 10/01/201740,588
Annual Shareholder Report
35

Shares or
Principal
Amount
Value in
U.S. Dollars
$120,000Prologis, Sr. Note, 5.500%, 04/01/2012122,546
20,000Prologis, Sr. Note, 7.625%, 8/15/201421,473
40,000Simon Property Group LP, 6.750%, 05/15/201443,938
50,000Simon Property Group, Inc., 6.350%, 08/28/201254,065
TOTAL443,866
Foreign-Local-Government – 0.0%
50,000Quebec, Province of, Note, Series MTNA, 7.035%, 3/10/202661,788
Municipal Services – 0.1%
140,0002,3Army Hawaii Family Housing , 5.524%, 6/15/2050100,631
100,0002,3Camp Pendleton & Quantico Housing LLC, 5.572%, 10/01/205072,232
TOTAL172,863
Technology – 0.3%
20,000Cisco Systems, Inc., Sr. Unsecd. Note, 5.500%, 02/22/201622,532
40,000Dell Computer Corp., Deb., 7.100%, 04/15/202844,692
60,000Dun & Bradstreet Corp., Sr. Unsecd. Note, 5.500%, 03/15/201162,732
105,000Fiserv, Inc., Sr. Note, 6.800%, 11/20/2017118,664
50,000Harris Corp., 5.950%, 12/01/201754,286
60,000Hewlett-Packard Co., Note, 5.400%, 03/01/201766,422
200,000IBM Corp., Sr. Note, 5.700%, 09/14/2017224,896
100,000Oracle Corp., Sr. Unsecd. Note, Series WI, 5.000%, 01/15/2011104,909
TOTAL699,133
Transportation@0018Railroads – 0.1%
100,000Burlington Northern Santa Fe Corp., 4.875%, 01/15/2015107,436
50,000Union Pacific Corp., 4.875%, 01/15/201553,355
45,000Union Pacific Corp., Bond, 6.625%, 2/01/202950,906
TOTAL211,697
Transportation@0018Services – 0.0%
75,0002,3Enterprise Rent-A-Car USA Finance Co., 6.375%, 10/15/201778,488
Utility@0018Electric – 0.5%
60,000Appalachian Power Co., Sr. Unsecd. Note, 7.950%, 01/15/202074,669
50,000Cleveland Electric Illuminating Co., Sr. Unsecd. Note, 5.950%, 12/15/203648,355
50,000Commonwealth Edison Co., 1st Mtg. Bond, 5.800%, 03/15/201854,814
40,000Consolidated Edison Co., Sr. Unsecd. Note, 5.500%, 09/15/201643,238
10,000Consolidated Edison Co., Sr. Unsecd. Note, 6.650%, 04/01/201911,783
60,0002,3Electricite De France, 5.500%, 01/26/201466,861
Annual Shareholder Report
36

Shares or
Principal
Amount
Value in
U.S. Dollars
$50,0002,3FirstEnergy Solutions Corp., Company Guarantee, Series 144A, 6.050%, 08/15/202152,773
90,0002,3FirstEnergy Solutions Corp., Series 144A, 4.800%, 02/15/201595,147
83,2702,3Great River Energy, 1st Mtg. Note, 5.829%, 07/01/201790,138
120,000MidAmerican Energy Co., 4.650%, 10/01/2014129,494
100,000National Rural Utilities Cooperative Finance Corp., Sr. Unsecd. Note, 10.375%, 11/01/2018136,045
30,000Northern States Power Co., MN, 1st Mtg. Bond, 5.250%, 03/01/201832,699
60,000PPL Energy Supply LLC, Sr. Unsecd. Note, 6.000%, 12/15/203658,037
40,000Progress Energy, Inc., 7.050%, 03/15/201946,654
100,000Union Electric Co., 6.000%, 04/01/2018109,162
120,000Virginia Electric & Power Co., Sr. Unsecd. Note, 5.000%, 06/30/2019127,057
80,000Virginia Electric & Power Co., Sr. Unsecd. Note, 5.100%, 11/30/201287,639
TOTAL1,264,565
Utility@0018Natural Gas Distributor – 0.1%
120,000Atmos Energy Corp., 5.125%, 01/15/2013129,109
15,000Atmos Energy Corp., 8.500%, 03/15/201918,989
60,000Sempra Energy, Sr. Unsecd. Note, 6.500%, 06/01/201666,922
TOTAL215,020
Utility@0018Natural Gas Pipelines – 0.2%
100,000Duke Capital Corp., Sr. Note, 6.250%, 02/15/2013109,493
70,000Enbridge, Inc., Sr. Note, 5.600%, 04/01/201776,332
110,000Enterprise Products Operating LLC, Company Guarantee, 9.750%, 01/31/2014134,117
100,000Kinder Morgan Energy Partners LP, Sr. Unsecd. Note, 5.800%, 03/15/203594,305
TOTAL414,247
TOTAL CORPORATE BONDS
(IDENTIFIED COST $16,693,653)
17,015,162
Government AgencY – 1.1%
2,550,000Federal Home Loan Mortgage Corp., 4.625%, 10/25/2012
(IDENTIFIED COST $2,551,026)
2,793,165
Governments/Agencies – 0.1%
Sovereign – 0.1%
75,000United Mexican States, 6.625%, 03/03/201585,087
30,000United Mexican States, Series MTNA, 6.750%, 09/27/203434,055
TOTAL GOVERNMENTS/AGENCIES
(IDENTIFIED COST $106,742)
119,142
Annual Shareholder Report
37

Shares or
Principal
Amount
Value in
U.S. Dollars
Mortgage-Backed Securities – 0.4%
$9,271Federal Home Loan Mortgage Corp. Pool C00592, 7.000%, 3/1/202810,239
7,288Federal Home Loan Mortgage Corp. Pool C00896, 7.500%, 12/1/20298,064
20,431Federal Home Loan Mortgage Corp. Pool C17281, 6.500%, 11/1/202822,286
16,502Federal Home Loan Mortgage Corp. Pool C19588, 6.500%, 12/1/202818,001
5,563Federal Home Loan Mortgage Corp. Pool C25621, 6.500%, 5/1/20296,068
24,878Federal Home Loan Mortgage Corp. Pool C76361, 6.000%, 2/1/203326,954
68,163Federal Home Loan Mortgage Corp. Pool E01545, 5.000%,
15 Year, 1/1/2019
73,055
5,665Federal Home Loan Mortgage Corp. Pool E20252, 7.000%,
15 Year, 7/1/2011
5,874
1,346Federal Home Loan Mortgage Corp. Pool E77591, 6.500%, 7/1/20141,443
18,506Federal Home Loan Mortgage Corp. Pool E99510, 5.500%, 9/1/201820,002
20,564Federal Home Loan Mortgage Corp. Pool G01444, 6.500%, 8/1/203222,419
13,204Federal National Mortgage Association Pool 251697, 6.500%,
30 Year, 5/1/2028
14,416
32,606Federal National Mortgage Association Pool 252334, 6.500%,
30 Year, 2/1/2029
35,497
75,582Federal National Mortgage Association Pool 254720, 4.500%, 5/1/201880,217
74,557Federal National Mortgage Association Pool 254802, 4.500%, 7/1/201879,129
35,189Federal National Mortgage Association Pool 254905, 6.000%, 10/1/203338,067
70,222Federal National Mortgage Association Pool 255075, 5.500%, 2/1/202475,155
80,030Federal National Mortgage Association Pool 255079, 5.000%, 2/1/201985,724
3,420Federal National Mortgage Association Pool 303168, 9.500%,
30 Year, 2/1/2025
4,031
1,862Federal National Mortgage Association Pool 323159, 7.500%, 4/1/20282,062
14,759Federal National Mortgage Association Pool 323640, 7.500%, 4/1/202916,348
651Federal National Mortgage Association Pool 323970, 7.000%,
15 Year, 10/1/2014
698
27,133Federal National Mortgage Association Pool 428865, 7.000%, 6/1/202830,065
2,912Federal National Mortgage Association Pool 443215, 6.000%, 10/1/20283,161
1,531Federal National Mortgage Association Pool 511365, 7.000%, 8/1/20291,696
284Federal National Mortgage Association Pool 514184, 7.500%, 9/1/2029315
Annual Shareholder Report
38

Shares or
Principal
Amount
Value in
U.S. Dollars
$67,158Federal National Mortgage Association Pool 545993, 6.000%, 11/1/203272,736
26,995Federal National Mortgage Association Pool 555272, 6.000%, 3/1/203329,237
62,012Federal National Mortgage Association Pool 713974, 5.500%, 7/1/203366,268
81,626Federal National Mortgage Association Pool 721502, 5.000%, 7/1/203385,975
1,480Government National Mortgage Association Pool 352214, 7.000%, 4/15/20231,621
6,131Government National Mortgage Association Pool 451522, 7.500%,
30 Year, 10/15/2027
6,767
13,594Government National Mortgage Association Pool 462556, 6.500%, 2/15/202814,809
487Government National Mortgage Association Pool 462739, 7.500%, 5/15/2028538
705Government National Mortgage Association Pool 464835, 6.500%, 9/15/2028767
10,787Government National Mortgage Association Pool 469699, 7.000%, 11/15/202811,876
12,404Government National Mortgage Association Pool 486760, 6.500%, 12/15/202813,515
2,372Government National Mortgage Association Pool 780339, 8.000%,
30 Year, 12/15/2023
2,628
15,018Government National Mortgage Association Pool 780453, 7.500%,
30 Year, 12/15/2025
16,564
14,325Government National Mortgage Association Pool 780584, 7.000%,
30 Year, 6/15/2027
15,794
TOTAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $958,314)
1,020,081
Municipal – 0.0%
Illinois – 0.0%
90,000Chicago, IL Metropolitan Water Reclamation District, Direct Payment Taxable Limited GO Build America Bonds, 5.720%, 12/01/2038 (IDENTIFIED COST $90,000)95,291
U.S. Treasury – 4.7%
425,0004,5United States Treasury Bill, 0.06%, 12/10/2009424,994
3,250,0004,5United States Treasury Bill, 0.06%, 2/4/20103,249,912
400,0004,5United States Treasury Bill, 0.065%, 2/18/2010399,987
3,700,0004,5United States Treasury Bill, 0.08%, 1/21/20103,699,974
1,600,0004,5United States Treasury Bill, 0.115%, 12/31/20091,599,908
1,830,0004,5United States Treasury Bill, 0.15%, 12/3/20091,829,992
500,000United States Treasury Bond, 3.500%, 2/15/2039441,484
Annual Shareholder Report
39

Shares or
Principal
Amount
Value in
U.S. Dollars
$100,000United States Treasury Note, 3.125%, 8/31/2013106,219
TOTAL U.S. TREASURY
(IDENTIFIED COST $11,787,748)
11,752,470
Exchange-Traded Funds – 23.2%
22,326iShares MSCI Brazil Index Fund1,711,735
14,990iShares MSCI Canada Index Fund388,691
68,178iShares MSCI EAFE Index Fund3,778,425
116,535iShares MSCI Emerging Market Index Fund4,721,998
36,0471iShares MSCI South Korea Index Fund1,599,766
391,6521iShares Russell 1000 Index Fund23,589,200
345,811iShares Russell 2000 Index Fund20,091,619
22,2081SPDR S&P China ETF1,609,192
TOTAL EXCHANGE-TRADED FUNDS
(IDENTIFIED COST $50,235,289)
57,490,626
Mutual Funds – 25.0%;6
199,106Emerging Markets Fixed Income Core Fund4,786,699
946,934Federated Mortgage Core Portfolio9,677,667
1,867,382High Yield Bond Portfolio11,484,402
36,095,0227Prime Value Obligations Fund, Institutional Shares, 0.22%36,095,022
TOTAL MUTUAL FUNDS
(IDENTIFIED COST $59,546,221)
62,043,790
TOTAL INVESTMENTS — 100.3%
(IDENTIFIED COST $227,831,151)8
248,799,012
OTHER ASSETS AND LIABILITIES - NET — (0.3)%9(643,382)
TOTAL NET ASSETS — 100%$248,155,630
Annual Shareholder Report
40

  • At November 30, 2009, the Fund had the following outstanding futures contracts:
DescriptionNumber of
Contracts
Notional
Value
Expiration
Date
Unrealized
Appreciation/
(Depreciation)
1ASX SPI 200 Index Short Futures108$12,676,500December 2009$(301,812)
1OMX 30 Index Short Futures640$60,080,000December 2009$296,519
1SGX MSCI Singapore Index Short Futures191$12,560,160December 2009$230,987
1Swiss Market Index Short Futures306$19,112,760December 2009$85,303
1Topix Index Short Futures40$336,000,000December 2009$173,774
1United States Treasury Bonds 30-Year Short Futures18$2,208,938March 2010$(45,316)
1United States Treasury Notes 2-Year Short Futures30$6,536,719March 2010$(17,877)
1United States Treasury Notes 5-Year Short Futures40$4,690,625March 2010$(42,274)
1AEX Index Long Futures45$2,751,300December 2009$(213,689)
1CAC 40 Index Long Futures320$11,758,400December 2009$(863,068)
1DAX Index Long Futures64$9,018,400December 2009$415,652
1FTSE 100 Index Long Futures320$16,628,800December 2009$1,003,042
1FTSE/MIB Index Long Futures35$3,841,600December 2009$(93,678)
1Hang Seng Index Long Futures105$114,177,000December 2009$(646,796)
1IBEX 35 Index Long Futures45$5,252,850December 2009$(199,567)
1MSCI E-Mini EAFE Index Long Futures19$1,483,900December 2009$(8,559)
1Russell 2000 Mini Index Long Futures10$579,200December 2009$(11,483)
1S & P 500 Index Long Futures33$9,032,100December 2009$611,193
1S&P/TSE 60 Index Long Futures57$7,746,300December 2009$213,628
NET UNREALIZED APPRECIATION ON FUTURES CONTRACTS$585,979
  • At November 30, 2009, the Fund had the following open swap contract:
Credit Default
Swap Counterparty
Goldman Sachs & Co.
Reference EntitySeries 12 Investment Grade Index
Buy/SellSell
Pay/Receive Fixed Rate1.00%
Expiration Date6/20/2014
Implied Credit Spread at 11/30/2009100.48%
Notional Amount$9,920,000
Market Value$(32,854)
Upfront Premiums Paid/(Received)$(255,787)
Unrealized Appreciation$222,933
Annual Shareholder Report
41

  • At November 30, 2009, the Fund had the following outstanding foreign exchange contracts:
Settlement DateForeign
Currency
Units to
Deliver/
Receive
In
Exchange
For
Unrealized
Appreciation/
(Depreciation)
Contracts Purchased:
12/2/200912,810,634 Australian Dollar$11,716,606$16,657
12/2/20097,470,781 Canadian Dollar$7,030,132$48,491
12/2/2009306,704 Canadian Dollar$290,101$503
12/2/200932,391,246 Euro$48,247,409$389,702
12/2/20091,560,492 Euro$2,320,904$22,254
12/3/2009343,561,484 Japanese Yen$3,983,322$(8,756)
12/2/200916,471,084 Pound Sterling$27,365,388$(268,818)
12/2/2009642,290 Pound Sterling$1,079,105$(22,474)
12/2/200962,169,688 Swedish Krona$8,892,818$24,810
12/2/200919,575,952 Swiss Francs$19,497,960$(8,735)
1/6/20107,777,485 Canadian Dollar$7,368,532$628
1/6/201032,651,737 Euro$48,953,443$69,528
1/6/201016,624,373 Pound Sterling$27,270,289$72,604
Contracts Sold:
12/2/200912,537,084 Australian Dollar$11,385,678$(97,040)
12/2/2009273,550 Australian Dollar$253,586$3,042
12/2/20097,777,485 Canadian Dollar$7,368,532$(698)
12/2/200933,951,738 Euro$50,907,236$(73,034)
12/2/200917,113,374 Pound Sterling$28,077,912$(75,289)
12/2/200962,067,825 Swedish Krona$8,870,608$(32,408)
12/2/2009101,863 Swedish Krona$14,810$198
12/2/200918,703,600 Swiss Francs$18,402,716$(218,022)
12/2/2009872,352 Swiss Francs$858,462$(10,025)
12/3/2009341,599,700 Japanese Yen$3,770,375$(181,517)
12/3/20091,961,784 Japanese Yen$21,984$(711)
1/6/201012,602,633 Australian Dollar$11,487,300$(16,201)
1/6/2010333,800,000 Japanese Yen$3,870,818$8,472
1/6/201019,110,952 Swiss Francs$19,038,985$7,702
1/7/201060,037,061 Swedish Krona$8,588,772$(24,141)
NET UNREALIZED DEPRECIATION ON FOREIGN EXCHANGE CONTRACTS$(373,278)
  • Net Unrealized Appreciation/Depreciation on Futures Contracts, Swap Contract and Foreign Exchange Contracts is included in “Other Assets and Liabilities — Net”.
Annual Shareholder Report
42

  • Note: The categories of investments are shown as a percentage of total net assets at November 30, 2009.
  • Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
  • Level 1 — quoted prices in active markets for identical securities
  • Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
  • Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
  • The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
Annual Shareholder Report
43

    • The following is a summary of the inputs used, as of November 30, 2009, in valuing the Fund's assets carried at fair value:
    Valuation Inputs
    Level 1 - 
    Quoted
    Prices and
    Investments in
    Mutual Funds*
    Level 2 - 
    Other
    Significant
    Observable
    Inputs
    Level 3 - 
    Significant
    Unobservable
    Inputs
    Total
    Equity Securities:
    Domestic$89,517,516$ — $ — $89,517,516
    International3,506,834525,749 — 4,032,583
    Debt Securities:
    Asset-Backed Securities — 2,158,302 — 2,158,302
    Collateralized Mortgage Obligations — 760,884 — 760,884
    Corporate Bonds — 17,015,162 — 17,015,162
    Government Agencies — 2,793,165 — 2,793,165
    Governments/Agencies — 119,142 — 119,142
    Mortgage-Backed Securities — 1,020,081 — 1,020,081
    Municipal — 95,291 — 95,291
    U.S. Treasury — 11,752,470 — 11,752,470
    Exchange-Traded Funds57,490,626 —  — 57,490,626
    Mutual Funds62,043,790 —  — 62,043,790
    TOTAL SECURITIES$212,558,766$36,240,246$ — $248,799,012
    OTHER FINANCIAL INSTRUMENTS**$460,934$(25,300)$ — $435,634
    *Emerging Markets Fixed Income Core Fund (EMCORE) is an affiliated limited partnership offered only to registered investment companies and other accredited investors. EMCORE invests primarily in emerging markets fixed-income securities.
    **Other financial instruments include futures contracts, swap contracts and foreign exchange contracts.
    • The following acronyms are used throughout this portfolio:
    ADR — American Depositary Receipt
    MTN — Medium Term Note
    REITs — Real Estate Investment Trusts
    • See Notes which are an integral part of the Financial Statements
    Annual Shareholder Report
    44

    Statement of Assets and Liabilities

    November 30, 2009

    Assets:
    Total investments in securities, at value including $62,043,790 of investments in affiliated issuers (Note 5) (identified cost $227,831,151)$248,799,012
    Cash16,036
    Income receivable556,520
    Receivable for investments sold66,560
    Receivable for shares sold206,868
    Receivable for foreign exchange contracts664,591
    Receivable for periodic payments from swap contracts19,565
    Other receivables5,570
    TOTAL ASSETS250,334,722
    Liabilities:
    Payable for investments purchased$80,000
    Payable for shares redeemed463,868
    Payable for foreign exchange contracts1,037,869
    Payable for daily variation margin302,260
    Income distribution payable11,841
    Swaps, at value (premiums received $255,787)32,854
    Payable for investment adviser fee (Note 5)749
    Payable for transfer and dividend disbursing agent fees and expenses77,681
    Payable for Directors'/Trustees' fees2,843
    Payable for distribution services fee (Note 5)48,577
    Payable for shareholder services fee (Note 5)39,794
    Accrued expenses80,756
    TOTAL LIABILITIES2,179,092
    Net assets for 15,864,690 shares outstanding$248,155,630
    Net Assets Consist of:
    Paid-in capital$265,377,267
    Net unrealized appreciation of investments, futures contracts, swap contracts and translation of assets and liabilities in foreign currency21,408,749
    Accumulated net realized loss on investments, futures contracts, swap contracts and foreign currency transactions(38,573,661)
    Distributions in excess of net investment income(56,725)
    TOTAL NET ASSETS$248,155,630
    Annual Shareholder Report
    45

    Statement of Assets and Liabilities — continued
    Net Asset Value, Offering Price and Redemption Proceeds Per Share
    Class A Shares:
    Net asset value per share ($149,696,003 ÷ 9,563,632 shares outstanding), no par value, unlimited shares authorized$15.65
    Offering price per share (100/94.50 of $15.65)$16.56
    Redemption proceeds per share$15.65
    Class B Shares:
    Net asset value per share ($20,150,846 ÷ 1,290,750 shares outstanding), no par value, unlimited shares authorized$15.61
    Offering price per share$15.61
    Redemption proceeds per share (94.50/100 of $15.61)$14.75
    Class C Shares:
    Net asset value per share ($28,278,271 ÷ 1,818,411 shares outstanding), no par value, unlimited shares authorized$15.55
    Offering price per share$15.55
    Redemption proceeds per share (99.00/100 of $15.55)$15.39
    Class K Shares:
    Net asset value per share ($47,254,069 ÷ 3,014,519 shares outstanding), no par value, unlimited shares authorized$15.68
    Offering price per share$15.68
    Redemption proceeds per share$15.68
    Institutional Shares:
    Net asset value per share ($2,776,441 ÷ 177,378 shares outstanding), no par value, unlimited shares authorized$15.65
    Offering price per share$15.65
    Redemption proceeds per share$15.65
    • See Notes which are an integral part of the Financial Statements
    Annual Shareholder Report
    46

    Statement of Operations

    Year Ended November 30, 2009

    Investment Income:
    Dividends (including $2,232,461 received from affiliated issuers (Note 5) and net of foreign taxes withheld of $24,801)$4,778,547
    Interest 1,707,239
    Investment income allocated from affiliated partnership (Note 5)$220,339
    Expenses allocated from affiliated partnership (Note 5)(717)
    Net income allocated from affiliated partnership219,622
    TOTAL INCOME AND ALLOCATED EXPENSES6,705,408
    Expenses:
    Investment adviser fee (Note 5)1,452,949
    Administrative personnel and services fee (Note 5)288,851
    Custodian fees44,745
    Transfer and dividend disbursing agent fees and expenses — Class A Shares294,736
    Transfer and dividend disbursing agent fees and expenses — Class B Shares53,513
    Transfer and dividend disbursing agent fees and expenses — Class C Shares50,062
    Transfer and dividend disbursing agent fees and expenses — Class K Shares120,038
    Transfer and dividend disbursing agent fees and expenses — Institutional Shares1,414
    Directors'/Trustees' fees13,278
    Auditing fees26,250
    Legal fees12,052
    Portfolio accounting fees124,846
    Distribution services fee — Class B Shares (Note 5)148,340
    Distribution services fee — Class C Shares (Note 5)170,529
    Distribution services fee — Class K Shares (Note 5)155,255
    Shareholder services fee — Class A Shares (Note 5)324,837
    Shareholder services fee — Class B Shares (Note 5)49,447
    Shareholder services fee — Class C Shares (Note 5)56,289
    Account administration fee — Class A Shares2,771
    Account administration fee — Class C Shares363
    Share registration costs64,011
    Printing and postage106,740
    Insurance premiums4,188
    Miscellaneous5,989
    TOTAL EXPENSES3,571,493
    Annual Shareholder Report
    47

    Statement of Operations — continued
    Waivers, Reimbursements and Expense Reduction:
    Waiver/reimbursement of investment adviser fee (Note 5)$(287,768)
    Waiver of administrative personnel and services fee (Note 5)(57,635)
    Waiver of distribution services fee — Class K Shares (Note 5)(615)
    Reimbursement of transfer and dividend disbursing agent fees and expenses — Class A Shares (Note 5)(103,291)
    Reimbursement of transfer and dividend disbursing agent fees and expenses — Class B Shares (Note 5)(15,588)
    Reimbursement of transfer and dividend disbursing agent fees and expenses — Class C Shares (Note 5)(6,887)
    Fees paid indirectly from directed brokerage arrangements (Note 6)(20,630)
    TOTAL WAIVERS, REIMBURSEMENTS AND EXPENSE REDUCTION$(492,414)
    Net expenses$3,079,079
    Net investment income3,626,329
    Realized and Unrealized Gain (Loss) on Investments, Futures Contracts, Swap Contracts and Foreign Currency Transactions:
    Net realized loss on investments and foreign currency transactions (including realized gain of $26,870 on sales of investments in affiliated issuers) (Note 5)(3,314,633)
    Net realized gain on futures contracts3,825,915
    Net realized gain on swap contracts99,956
    Net realized loss allocated from affiliated partnership (Note 5)(63,219)
    Net change in unrealized depreciation of investments and translation of assets and liabilities in foreign currency37,621,136
    Net change in unrealized appreciation of futures contracts257,311
    Net change in unrealized appreciation of swap contracts57,201
    Net realized and unrealized gain on investments, futures contracts, swap contracts and foreign currency transactions38,483,667
    Change in net assets resulting from operations$42,109,996
    • See Notes which are an integral part of the Financial Statements
    Annual Shareholder Report
    48

    Statement of Changes in Net Assets

    Year Ended November 3020092008
    Increase (Decrease) in Net Assets
    Operations:
    Net investment income$3,626,329$5,553,895
    Net realized gain (loss) on investments including allocation from affiliated partnership, futures contracts, swap contracts and foreign currency transactions548,019(29,685,004)
    Realized gain distributions from affiliated investment company shares — 3,037,079
    Net change in unrealized appreciation/depreciation of investments, futures contracts, swap contracts and translation of assets and liabilities in foreign currency37,935,648(46,314,638)
    CHANGE IN NET ASSETS RESULTING FROM OPERATIONS42,109,996(67,408,668)
    Distributions to Shareholders:
    Distributions from net investment income
    Class A Shares(2,629,338)(4,209,600)
    Class B Shares(267,729)(558,754)
    Class C Shares(285,201)(436,499)
    Class K Shares(384,837)(373,935)
    Institutional Shares(19,202) — 
    Distributions from net realized gain on investments, futures contracts, swap contracts and foreign currency transactions
    Class A Shares — (18,997,795)
    Class B Shares — (3,970,690)
    Class C Shares — (2,615,505)
    Class K Shares — (1,610,535)
    CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS(3,586,307)(32,773,313)
    Annual Shareholder Report
    49

    Statement of Changes in Net Assets — continued
    Year Ended November 3020092008
    Share Transactions:
    Proceeds from sale of shares69,643,36261,467,368
    Proceeds from shares issued in connection with the tax-free transfer of assets from Federated Target ETF Fund 20155,272,582 — 
    Proceeds from shares issued in connection with the tax-free transfer of assets from Federated Target ETF Fund 20258,053,895 — 
    Proceeds from shares issued in connection with the tax-free transfer of assets from Federated Target ETF Fund 20356,951,526 — 
    Net asset value of shares issued to shareholders in payment of distributions declared3,363,17430,823,744
    Cost of shares redeemed(70,213,064)(85,242,261)
    CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS23,071,4757,048,851
    Change in net assets61,595,164(93,133,130)
    Net Assets:
    Beginning of period186,560,466279,693,596
    End of period (including distributions in excess of net investment income of $(56,725) and $(224,475), respectively)$248,155,630$186,560,466
    • See Notes which are an integral part of the Financial Statements
    Annual Shareholder Report
    50

    Notes to Financial Statements

    November 30, 2009

    1. ORGANIZATION

    Federated Stock and Bond Fund (formerly, Federated Stock and Bond Fund, Inc.) (the “Fund”), is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified, open-end management investment company. The Fund offers five classes of shares: Class A Shares, Class B Shares, Class C Shares, Class K Shares and Institutional Shares. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. The financial highlights of the Institutional Shares are presented separately. The primary investment objective of the Fund is to provide relative safety of capital with the possibility of long-term growth of capital and income. Consideration is also given to current income.

    Effective June 12, 2009, the Fund began offering Institutional Shares.

    On June 15, 2009, the Fund received assets from Federated Target ETF Fund 2015 (FT2015), Federated Target ETF Fund 2025 (FT2025) and Federated Target ETF Fund 2035 (FT2035) (collectively, “Acquired Funds”) as a result of a tax-free reorganization, as follows:

    Shares of the
    Fund Issued
    Acquired Funds
    Net Assets
    Received
    Unrealized
    Appreciation1
    Net Assets
    of the Fund
    Immediately
    Prior to
    Combination
    Net Assets
    of the Fund
    Immediately
    After
    Combination
    FT2015374,734$5,272,582$244,522
    FT2025572,3368,053,895705,623
    FT2035494,0246,951,526499,642
    TOTAL1,441,094$20,278,003$1,449,787$200,320,350$220,598,353
    1Unrealized appreciation is included in the Acquired Funds Net Assets Received amount shown above.

    2. SIGNIFICANT ACCOUNTING POLICIES

    The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with U.S. generally accepted accounting principles (GAAP).

    Investment Valuation

    In calculating its net asset value (NAV), the Fund generally values investments as follows:

    • Equity securities listed on an exchange or traded through a regulated market system are valued at their last reported sale price or official closing price in their principal exchange or market.
    • Fixed-income securities acquired with remaining maturities greater than 60 days are fair valued using price evaluations provided by a pricing service approved by the Trustees.
    • Fixed-income securities acquired with remaining maturities of 60 days or less are valued at their cost (adjusted for the accretion of any discount or amortization of any premium).
    • Shares of other mutual funds are valued based upon their reported NAVs.
    • Derivative contracts listed on exchanges are valued at their reported settlement or closing price.
    • Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Trustees.
    Annual Shareholder Report
    51

    If the Fund cannot obtain a price or price evaluation from a pricing service for an investment, the Fund may attempt to value the investment based upon the mean of bid and asked quotations or fair value the investment based on price evaluations, from one or more dealers. If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, the Fund uses the fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund could purchase or sell an investment at the price used to calculate the Fund's NAV.

    Fair Valuation and Significant Events Procedures

    The Trustees have authorized the use of pricing services to provide evaluations of the current fair value of certain investments for purposes of calculating the NAV. Factors considered by pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and asked for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for other types of fixed-income securities and OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Trustees.

    The Trustees also have adopted procedures requiring an investment to be priced at its fair value whenever the Adviser determines that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment's value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:

    • With respect to securities traded in foreign markets, significant trends in U.S. equity markets or in the trading of foreign securities index futures or options contracts;
    • With respect to price evaluations of fixed-income securities determined before the close of regular trading on the NYSE, actions by the Federal Reserve Open Market Committee and other significant trends in U.S. fixed-income markets;
    • Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded; and
    • Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, a natural disaster affecting the issuer's operations or regulatory changes or market developments affecting the issuer's industry.

    The Trustees have approved the use of a pricing service to determine the fair value of equity securities traded principally in foreign markets when the Adviser determines that there has been a significant trend in the U.S. equity markets or in index futures trading. For other significant events, the Fund may seek to obtain more current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the Fund will determine the fair value of the investment using another method approved by the Trustees.

    Annual Shareholder Report
    52

    Repurchase Agreements

    It is the policy of the Fund to require the other party to a repurchase agreement to transfer to the Fund's custodian or sub-custodian eligible securities or cash with a market value (after transaction costs) at least equal to the repurchase price to be paid under the repurchase agreement. The eligible securities are transferred to accounts with the custodian or sub-custodian in which the Fund holds a “securities entitlement” and exercises “control” as those terms are defined in the Uniform Commercial Code. The Fund has established procedures for monitoring the market value of the transferred securities and requiring the transfer of additional eligible securities if necessary to equal at least the repurchase price. These procedures also allow the other party to require securities to be transferred from the account to the extent that their market value exceeds the repurchase price or in exchange for other eligible securities of equivalent market value.

    With respect to agreements to repurchase U.S. government securities and cash items, the Fund treats the repurchase agreement as an investment in the underlying securities and not as an obligation of the other party to the repurchase agreement. Other repurchase agreements are treated as obligations of the other party secured by the underlying securities. Nevertheless, the insolvency of the other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause the Fund to receive less than the full repurchase price. Under the terms of the repurchase agreement, any amounts received by the Fund in excess of the repurchase price and related transaction costs must be remitted to the other party.

    The Fund may enter into repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the custodian or sub-custodian for investment companies and other clients advised by the Fund's Adviser and its affiliates. The Fund will participate on a pro rata basis with the other investment companies and clients in its share of the securities transferred under such repurchase agreements and in its share of proceeds from any repurchase or other disposition of such securities.

    Investment Income, Gains and Losses, Expenses and Distributions

    Investment transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Foreign dividends are recorded on the ex-dividend date or when the Fund is informed of the ex-dividend date. Positive or negative inflation adjustments on Treasury Inflation-Protected Securities are included in interest income. Distributions of net investment income are declared and paid quarterly. Non-cash dividends included in dividend income, if any, are recorded at fair value. Investment income, realized and unrealized gains and losses and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that Class A Shares, Class B Shares, Class C Shares, Class K Shares and Institutional Shares may bear distribution services fees, shareholder services fees, account administration fees and certain transfer and dividend disbursing agent fees unique to those classes. The Fund may also invest in Emerging Markets Fixed Income Core Fund (EMCORE), a portfolio of Federated Core Trust II, L.P., which is a limited partnership established under the laws of the state of Delaware. The Fund records daily its proportionate share of income, expenses, realized and unrealized gains and losses from EMCORE. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.

    Annual Shareholder Report
    53

    Premium and Discount Amortization/Paydown Gains and Losses

    All premiums and discounts on fixed-income securities are amortized/accreted for financial statement purposes. Gains and losses realized on principal payment of mortgage-backed securities (paydown gains and losses) are classified as part of investment income.

    Federal Taxes

    It is the Fund's policy to comply with the Subchapter M provision of the Internal Revenue Code (the “Code”) and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary. As of and during the year ended November 30, 2009, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of September 5, 2008, the Fund's domicile and form of organization changed from a Maryland Corporation to a Massachusetts business Trust. As of November 30, 2009, tax years 2006 through 2009 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America, the state of Maryland, the Commonwealth of Massachusetts and the Commonwealth of Pennsylvania.

    The Fund may be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The Fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or gains are earned.

    Other Taxes

    Through September 4, 2008, as an open-end management investment company incorporated in the state of Maryland but domiciled in the Commonwealth of Pennsylvania, the Fund is subject to the Pennsylvania Franchise Tax. This franchise tax is assessed annually on the value of the Fund, as represented by average net assets for the tax year.

    When-Issued and Delayed Delivery Transactions

    The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.

    Swap Contracts

    Swap contracts involve two parties that agree to exchange the returns (or the differential in rates of return) earned or realized on particular predetermined investments, instruments, indices or other measures. The gross returns to be exchanged or “swapped” between parties are generally calculated with respect to a “notional amount” for a predetermined period of time. The Fund may enter into interest rate, total return, credit default, currency and other swap agreements. Risks may arise upon entering into swap agreements from the potential inability of the counterparties to meet the terms of their contract from unanticipated changes in the value of the swap agreement. The Fund uses credit default swaps to manage exposure to a given issuer or sector by either selling protection to increase exposure, or buying protection to reduce exposure. The “buyer” in a credit default swap is obligated to pay the “seller” a periodic stream of payments over the term of the contract provided that no event of default on an underlying reference obligation has occurred. If an event of default occurs, the seller must pay the buyer the full notional value, or the “par value”, of the reference obligation Annual Shareholder Report
    54

    in exchange for the reference obligation. In connection with these agreements, securities may be identified as collateral in accordance with the terms of the respective swap agreements to provide assets of value and recourse in the event of default or bankruptcy/insolvency. Recovery values are assumed by market makers considering either industry standard recovery rates or entity specific factors and considerations until a credit event occurs. If a credit event has occurred, the recovery value is typically determined by a facilitated auction whereby a minimum number of allowable broker bids, together with a specific valuation method, are used to calculate the settlement value. The maximum amount of the payment that may occur, as a result of a credit event payable by the protection seller, is equal to the notional amount of the underlying index or security. The Fund's maximum exposure to loss of the notional value of credit default swaps outstanding at November 30, 2009 is $9,920,000.

    The Fund's maximum risk of loss from counterparty credit risk, either as the protection buyer or as the protection seller, is the fair value of the contract. This risk is mitigated by having a master netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund's exposure to the counterparty.

    Upfront payments received or paid by the Fund will be reflected as an asset or liability on the Statement of Assets and Liabilities. Changes in the value of swap contracts are included in swaps, at value, on the Statement of Assets and Liabilities, and periodic payments are reported as Net realized gain (loss) on swap contracts in the Statement of Operations.

    Swap contracts outstanding at period end are listed after the Fund's Portfolio of Investments.

    Futures Contracts

    The Fund purchases and sells financial futures contracts to manage cash flows, enhance yield and to potentially reduce transaction costs. Upon entering into a financial futures contract with a broker, the Fund is required to deposit in a segregated account a specified amount of cash or U.S. government securities. Futures contracts are valued daily and unrealized gains or losses are recorded in a “variation margin” account. Daily, the Fund receives from or pays to the broker a specified amount of cash based upon changes in the variation margin account. When a contract is closed, the Fund recognizes a realized gain or loss. Futures contracts have market risks, including the risk that the change in the value of the contract may not correlate with the changes in the value of the underlying securities. There is minimal counterparty risk to the Fund since futures are exchange traded and the exchange's clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default.

    Futures contracts outstanding at period end are listed after the Fund's Portfolio of Investments.

    Foreign Exchange Contracts

    The Fund may enter into foreign exchange contracts for the delayed delivery of securities or foreign currency exchange transactions. The Fund may enter into foreign exchange contracts to protect assets against adverse changes in foreign currency exchange rates or exchange control regulations. Purchased contracts are used to acquire exposure to foreign currencies, whereas, contracts to sell are used to hedge the Fund's securities against currency fluctuations. Risks may arise upon entering into these transactions from the potential inability Annual Shareholder Report
    55

    of counterparties to meet the terms of their commitments and from unanticipated movements in security prices or foreign exchange rates. The foreign exchange contracts are adjusted by the daily exchange rate of the underlying currency and any gains or losses are recorded for financial statement purposes as unrealized until the settlement date.

    Foreign exchange contracts outstanding at period end are listed after the Fund's Portfolio of Investments.

    Foreign Currency Translation

    The accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies (FCs) are translated into U.S. dollars based on the rates of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales of securities, income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.

    Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of FCs, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund's books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate.

    Restricted Securities

    The Fund may purchase securities which are considered restricted. Restricted securities are securities that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) are subject to contractual restrictions on public sales. In some cases, when a security cannot be offered for public sale without first being registered, the issuer of the restricted security has agreed to register such securities for resale, at the issuer's expense, either upon demand by the Fund or in connection with another registered offering of the securities. Many such restricted securities may be resold in the secondary market in transactions exempt from registration. Restricted securities may be determined to be liquid under criteria established by the Trustees. The Fund will not incur any registration costs upon such resales. The Fund's restricted securities are valued at the price provided by dealers in the secondary market or, if no market prices are available, at the fair value as determined in accordance with procedures established by and under the general supervision of the Trustees.

    Annual Shareholder Report
    56

    Additional information on restricted securities, excluding securities purchased under Rule 144A, if applicable, that have been deemed liquid by the Trustees, held at November 30, 2009, is as follows:
    SecurityAcquisition DateAcquisition CostMarket Value
    Union Central Life Ins Co, Note, 8.2%, 11/1/20263/31/1999$783,526$704,991

    Additional Disclosure Related to Derivative Instruments

    Fair Value of Derivative Instruments
    AssetLiability
    Statement of
    Assets and
    Liabilities
    Location
    Fair
    Value
    Statement of
    Assets and
    Liabilities
    Location
    Fair
    Value
    Derivatives not accounted for as hedging instruments under ASC Topic 815
    Interest rate contracts — $ — Payable for daily variation margin$105,467*
    Equity contracts —  — Payable for daily variation margin(691,446)*
    Foreign exchange contractsReceivable for foreign exchange contracts664,591Payable for foreign exchange contracts1,037,869
    Credit contractsReceivable for periodic payments from swap contracts19,565swaps, at value32,854
    Total derivatives not accounted for as hedging instruments under ASC Topic 815$684,156$484,744
    *Includes cumulative appreciation/depreciation of futures contracts as reported in the footnotes to the Portfolio of Investments. Only the current day's variation margin is reported within the Statement of Assets and Liabilities.
    Annual Shareholder Report
    57

    The Effect of Derivative Instruments on the Statement of Operations for the Year Ended November 30, 2009

    Amount of Realized Gain or (Loss) on Derivatives Recognized in Income
    Credit
    Default
    Swaps
    FuturesForward
    Currency
    Contracts
    Total
    Interest rate contracts$ — $(190,823)$ — $(190,823)
    Equity contracts — 4,016,738 — 4,016,738
    Foreign exchange contracts —  — (3,212)(3,212)
    Credit contracts99,956 —  — 99,956
    Total$99,956$3,825,915$(3,212)$3,922,659

    Change in Unrealized Appreciation or (Depreciation) on Derivatives
    Recognized in Income
    Credit
    Default
    Swaps
    FuturesForward
    Currency
    Contracts
    Total
    Interest rate contracts$ — $(270,452)$ — $(270,452)
    Equity contracts — 527,763 — 527,763
    Foreign exchange contracts —  — (373,278)(373,278)
    Credit contracts57,201 —  — 57,201
    Total$57,201$257,311$(373,278)$(58,766)

    Other

    The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated.

    Annual Shareholder Report
    58

    3. shares of beneficial interest

    The following tables summarize share activity:

    Year Ended November 3020092008
    Class A Shares:SharesAmountSharesAmount
    Shares sold1,851,463$25,328,0031,736,691$28,811,635
    Proceeds from shares issued in connection with the tax-free transfer of assets from Federated Target ETF Fund 2015138,7371,950,574 —  — 
    Proceeds from shares issued in connection with the tax-free transfer of assets from Federated Target ETF Fund 2025192,2542,703,126 —  — 
    Proceeds from shares issued in connection with the tax-free transfer of assets from Federated Target ETF Fund 2035184,5242,594,400 —  — 
    Shares issued to shareholders in payment of distributions declared182,9622,452,9021,246,09121,865,220
    Shares redeemed(2,550,336)(34,968,933)(3,205,676)(52,219,023)
    NET CHANGE RESULTING
    FROM CLASS A SHARE TRANSACTIONS
    (396)$60,072(222,894)$(1,542,168)
    Year Ended November 3020092008
    Class B Shares:SharesAmountSharesAmount
    Shares sold274,805$3,808,687253,445$4,287,345
    Shares issued to shareholders in payment of distributions declared19,052250,988242,3134,277,122
    Shares redeemed(656,572)(8,884,783)(914,395)(15,004,715)
    NET CHANGE RESULTING
    FROM CLASS B SHARE TRANSACTIONS
    (362,715)$(4,825,108)(418,637)$(6,440,248)
    Year Ended November 3020092008
    Class C Shares:SharesAmountSharesAmount
    Shares sold1,002,107$13,808,180643,591$10,471,614
    Shares issued to shareholders in payment of distributions declared19,606258,296154,2742,697,569
    Shares redeemed(783,732)(10,601,445)(552,725)(8,864,283)
    NET CHANGE RESULTING
    FROM CLASS C SHARE TRANSACTIONS
    237,981$3,465,031245,140$4,304,900
    Annual Shareholder Report
    59

    Year Ended November 3020092008
    Class K Shares:SharesAmountSharesAmount
    Shares sold1,822,012$25,416,4591,099,593$17,896,774
    Proceeds from shares issued in connection with the tax-free transfer of assets from Federated Target ETF Fund 2015192,9312,716,507 —  — 
    Proceeds from shares issued in connection with the tax-free transfer of assets from Federated Target ETF Fund 2025339,1374,775,071 —  — 
    Proceeds from shares issued in connection with the tax-free transfer of assets from Federated Target ETF Fund 2035269,0743,788,720 —  — 
    Shares issued to shareholders in payment of distributions declared28,544384,790113,6671,983,833
    Shares redeemed(1,080,496)(15,220,214)(572,618)(9,154,240)
    NET CHANGE RESULTING FROM CLASS K SHARE TRANSACTIONS1,571,202$21,861,333640,642$10,726,367
    Period Ended
    11/30/20091
    Year Ended
    11/30/2008
    Institutional Shares:SharesAmountSharesAmount
    Shares sold86,196$1,282,033 — $ — 
    Proceeds from shares issued in connection with the tax-free transfer of assets from Federated Target ETF Fund 201543,066605,501 —  — 
    Proceeds from shares issued in connection with the tax-free transfer of assets from Federated Target ETF Fund 202540,945575,698 —  — 
    Proceeds from shares issued in connection with the tax-free transfer of assets from Federated Target ETF Fund 203540,426568,406 —  — 
    Shares issued to shareholders in payment of distributions declared1,07916,198 —  — 
    Shares redeemed(34,334)(537,689) —  — 
    NET CHANGE RESULTING
    FROM INSTITUTIONAL SHARE TRANSACTIONS
    177,378$2,510,147 — $ — 
    NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS1,623,450$23,071,475244,251$7,048,851
    1Reflects operations from June 12, 2009, (date of initial investment) to November 30, 2009.
    Annual Shareholder Report
    60

    4. FEDERAL TAX INFORMATION

    The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. These differences are due in part to differing treatments for foreign currency transactions, reclassification of income for defaulted securities, partnership income reclassifications, swap income reclassifications, expiration of capital loss carryforwards and discount accretion/premium amortization on debt securities.

    For the year ended November 30, 2009, permanent differences identified and reclassified among the components of net assets were as follows:

    Increase (Decrease)
    Paid-In CapitalUndistributed
    Net Investment
    Income (Loss)
    Accumulated
    Net Realized
    Gain (Loss)
    $8,121,591$127,728$(8,249,319)

    Net investment income (loss), net realized gains (losses), and net assets were not affected by this reclassification.

    The tax character of distributions as reported on the Statement of Changes in Net Assets for the years ended November 30, 2009 and 2008, was as follows:

    20092008
    Ordinary income1$3,586,307$15,440,201
    Long-term capital gains$ — $17,333,112
    1For tax purposes, short-term capital gain distributions are considered ordinary income distributions.

    As of November 30, 2009, the components of distributable earnings on a tax basis were as follows:

    Distributions in excess of ordinary income$(82,025)
    Net unrealized appreciation$15,689,996
    Capital loss carryforwards$(32,829,608)

    The difference between book-basis and tax-basis net unrealized appreciation/depreciation is attributable in part to differing treatments for the deferral of losses on wash sales, partnership transactions, defaulted bond interest and discount accretion/premium amortization on debt securities.

    At November 30, 2009, the cost of investments for federal tax purposes was $231,155,224. The net unrealized appreciation of investments for federal tax purposes excluding any unrealized appreciation/depreciation resulting from changes in foreign currency exchange rates, outstanding foreign commitments, futures contracts and swap contracts was $17,643,788. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $20,070,842 and net unrealized depreciation from investments for those securities having an excess of cost over value of $2,427,054.

    Annual Shareholder Report
    61

    At November 30, 2009, the Fund had a capital loss carryforward of $32,829,608 which will reduce the Fund's taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Code and thus will reduce the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income tax. Pursuant to the Code, such capital loss carryforward will expire as follows:
    Expiration YearExpiration Amount
    2010$1,244,627
    2015$1,453,609
    2016$25,710,105
    2017$4,421,267

    As a result of the tax-free transfer of assets from Vintage Balanced Fund, Federated Target ETF Fund 2015, Federated Target ETF Fund 2025 and Federated Target ETF Fund 2035, certain capital loss carryforwards listed above may be limited.

    Capital loss carryforwards of $1,127,965 expired during the year ended November 30, 2009.

    5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

    Investment Adviser Fee

    Federated Global Investment Management Corp. is the Fund's investment adviser (the “Adviser”). The advisory agreement between the Fund and the Adviser provides for an annual fee equal to: (a) a maximum of 0.55% of the average daily net assets of the Fund; and (b) 4.50% of the gross income of the Fund, excluding gains or losses. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion. For the year ended November 30, 2009, the Adviser voluntarily waived $271,612 of its fee. For the year ended November 30, 2009, an affiliate of the adviser reimbursed $125,766 of transfer and dividend disbursing agent fees and expenses.

    Certain of the Fund's assets are managed by Federated Investment Management Company (FIMCO) and Federated Equity Management Company of Pennsylvania (FEMCOPA) (the “Sub-Advisers”). Under the terms of a sub-advisory agreement between the Adviser and the Sub-Advisers, the Sub-Advisers receive an allocable portion of the Fund's adviser fee. The fee is paid by the Adviser out of its resources and is not an incremental Fund expense. For the year ended November 30, 2009, FIMCO and FEMCOPA earned fees of $197,451 and $590,549, respectively.

    Annual Shareholder Report
    62

    Administrative Fee

    Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FAS is based on the average aggregate daily net assets of certain Federated funds as specified below:

    Administrative FeeAverage Aggregate Daily Net Assets
    of the Federated Funds
    0.150%on the first $5 billion
    0.125%on the next $5 billion
    0.100%on the next $10 billion
    0.075%on assets in excess of $20 billion

    The administrative fee received during any fiscal year shall be at least $150,000 per portfolio and $40,000 per each additional class of Shares. Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. FAS can modify or terminate this voluntary waiver at any time at its sole discretion. For the year ended November 30, 2009, the net fee paid to FAS was 0.111% of average daily net assets of the Fund. FAS waived $57,635 of its fee.

    Distribution Services Fee

    The Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund's Class B Shares, Class C Shares and Class K Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses at the following percentages of average daily net assets annually, to compensate FSC:

    Share Class NamePercentage of Average Daily
    Net Assets of Class
    Class B Shares0.75%
    Class C Shares0.75%
    Class K Shares0.50%

    Subject to the terms described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee. FSC can modify or terminate this voluntary waiver at any time at its sole discretion. For the year ended November 30, 2009, FSC voluntarily waived $615 of its fee. When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares. For the year ended November 30, 2009, FSC retained $8,507 of fees paid by the Fund.

    Sales Charges

    Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. For the year ended November 30, 2009, FSC retained $16,165 in sales charges from the sale of Class A Shares. FSC also retained $175 of CDSC relating to redemptions of Class C Shares.

    Annual Shareholder Report
    63

    Shareholder Services Fee

    The Fund may pay fees (Service Fees) up to 0.25% of the average daily net assets of the Fund's Class A Shares, Class B Shares and Class C Shares to financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. Financial intermediaries may include a company affiliated with management of Federated Investors, Inc. A financial intermediary affiliated with management of Federated Investors, Inc. received $1,386 of Service Fees for the year ended November 30, 2009. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for shareholder services fees. This voluntary reimbursement can be modified or terminated at any time. For the year ended November 30, 2009, FSSC did not receive any fees paid by the Fund.

    Interfund Transactions

    During the year ended November 30, 2009, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions complied with Rule 17a-7 under the Act and amounted to $64,273 and $26,071, respectively.

    Expense Limitation

    The Adviser and its affiliates (which may include FSC, FAS and FSSC) have voluntarily agreed to waive their fees and/or reimburse expenses so that the total operating expenses (as shown in the financial highlights) paid by the Fund's Class A Shares, Class B Shares, Class C Shares, Class K Shares and Institutional Shares (after the voluntary waivers and reimbursements) will not exceed 1.25%, 2.05%, 2.05%, 1.75% and 1.00%, respectively, through the later of (the “Termination Date”): (a) January 31, 2011; or (b) the date of the Fund's next effective prospectus. While the Adviser and its affiliates currently do not anticipate terminating these arrangements prior to the Termination Date, these arrangements may only be terminated prior to the Termination Date with the agreement of the Trustees.

    General

    Certain Officers and Trustees of the Fund are Officers and Directors or Trustees of the above companies.

    Transactions with Affiliated Companies

    Affiliated holdings are mutual funds which are managed by the Adviser or an affiliate of the Adviser. The Adviser has agreed to reimburse the Fund for certain investment adviser fees as a result of transactions in other affiliated mutual funds. For the year ended November 30, 2009, the Adviser reimbursed $16,156. Transactions with affiliated companies during the year ended November 30, 2009 were as follows:

    AffiliatesBalance of
    Shares Held
    11/30/2008
    Purchases/
    Additions
    Sales/
    Reductions
    Balance of
    Shares Held
    11/30/2009
    ValueDividend
    Income/
    Affiliated
    Investment
    Income
    Emerging Markets Fixed Income Core Fund47,274250,11298,280199,106$4,786,699$220,339
    Annual Shareholder Report
    64

    AffiliatesBalance of
    Shares Held
    11/30/2008
    Purchases/
    Additions
    Sales/
    Reductions
    Balance of
    Shares Held
    11/30/2009
    ValueDividend
    Income/
    Affiliated
    Investment
    Income
    Federated Inter-
    Continental Fund, Institutional Shares
    8,7465589,304 —  — 17,754
    Federated Mortgage Core Portfolio4,526,393624,6294,204,088946,9349,677,6671,296,208
    High Yield Bond Portfolio835,9521,909,967878,5371,867,38211,484,402803,909
    Prime Value Obligations Fund, Institutional Shares4,610,280267,250,160235,765,41836,095,02236,095,022114,590
    TOTAL OF AFFILIATED
    TRANSACTIONS
    10,028,645270,035,426240,955,62739,108,444$62,043,790$2,452,800

    6. EXPENSE Reduction

    The Fund directs portfolio trades to a broker that in turn pays a portion of the Fund's operating expenses. For the year ended November 30, 2009, the Fund's expenses were reduced by $20,630 under these arrangements.

    7. Investment TRANSACTIONS

    Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations (and in-kind contributions), for the year ended November 30, 2009, were as follows:

    Purchases$484,030,920
    Sales$516,527,904

    8. LINE OF CREDIT

    The Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement with PNC Bank. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings are charged interest at a rate offered to the Fund by PNC Bank at the time of the borrowing. As of November 30, 2009, there were no outstanding loans. During the year ended November 30, 2009, the Fund did not utilize the LOC.

    9. INTERFUND LENDING

    Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (SEC), the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of November 30, 2009, there were no outstanding loans. During the year ended November 30, 2009, the program was not utilized.

    Annual Shareholder Report
    65

    10. Legal Proceedings

    Since October 2003, Federated Investors, Inc. and related entities (collectively, Federated) and various Federated funds (Federated Funds) have been named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland. The lawsuits were purportedly filed on behalf of people who purchased, owned and/or redeemed shares of Federated-sponsored mutual funds during specified periods beginning November 1, 1998. The suits are generally similar in alleging that Federated engaged in illegal and improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused financial injury to the mutual fund shareholders. These lawsuits began to be filed shortly after Federated's first public announcement that it had received requests for information on shareholder trading activities in the Federated Funds from the SEC, the Office of the New York State Attorney General (NYAG) and other authorities. In that regard, on November 28, 2005, Federated announced that it had reached final settlements with the SEC and the NYAG with respect to those matters. As Federated previously reported in 2004, it has already paid approximately $8.0 million to certain funds as determined by an independent consultant. As part of these settlements, Federated agreed to pay for the benefit of fund shareholders additional disgorgement and a civil money penalty in the aggregate amount of an additional $72 million. Federated entities have also been named as defendants in several additional lawsuits that are now pending in the United States District Court for the Western District of Pennsylvania, alleging, among other things, excessive advisory and Rule 12b-1 fees. The Board of the Federated Funds retained the law firm of Dickstein Shapiro LLP to represent the Federated Funds in these lawsuits. Federated and the Federated Funds, and their respective counsel have been defending this litigation, and none of the Federated Funds remains a defendant in any of the lawsuits (though some could potentially receive any recoveries as nominal defendants). Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these lawsuits, all of which seek unquantified damages, attorneys' fees and expenses, and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Federated Funds, there can be no assurance that these suits, the ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Federated Fund redemptions, reduced sales of Federated Fund shares or other adverse consequences for the Federated Funds.

    11. Subsequent events

    Management has evaluated subsequent events through January 22, 2010, the date the financial statements were issued, and determined that no events have occurred that require additional disclosure

    12. FEDERAL TAX INFORMATION (UNAUDITED)

    For the fiscal year ended November 30, 2009, 73.53% of total income distributions made by the Fund are qualifying dividends which may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Act of 2003. Complete information is reported in conjunction with the reporting of your distributions on Form 1099-DIV.

    Of the ordinary income distributions made by the Fund during the year ended
    November 30, 2009, 58.06% qualify for the dividend received deduction available to corporate shareholders.

    Annual Shareholder Report
    66

    Report of Independent Registered Public Accounting Firm

    TO THE BOARD OF trusteeS AND THE SHAREHOLDERS OF FEDERATED STOCK AND BOND FUND:

    We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the Federated Stock and Bond Fund (the “Fund”), as of November 30, 2009, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the four-year period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for the periods presented prior to December 1, 2005, were audited by other independent registered public accountants whose report thereon dated January 23, 2006, expressed an unqualified opinion on those statements.

    We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of November 30, 2009 by correspondence with the custodian and transfer agent. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Federated Stock and Bond Fund as of November 30, 2009, and the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the four-year period then ended, in conformity with U.S. generally accepted accounting principles.

    Boston, Massachusetts
    January 22, 2010

    Annual Shareholder Report
    67

    Board of Trustees and Trust Officers

    The Board is responsible for managing the Trust's business affairs and for exercising all the Trust's powers except those reserved for the shareholders. The following tables give information about each Board member and the senior officers of the Fund. Where required, the tables separately list Board members who are “interested persons” of the Fund (i.e., “Interested” Board members) and those who are not (i.e., “Independent” Board members). Unless otherwise noted, the address of each person listed is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222. The address of all Independent Board members listed is 4000 Ericsson Drive, Warrendale, PA 15086-7561; Attention: Mutual Fund Board. As of December 31, 2009, the Trust comprised one portfolio, and the Federated Fund Complex consisted of 43 investment companies (comprising 145 portfolios). Unless otherwise noted, each Officer is elected annually. Unless otherwise noted, each Board member oversees all portfolios in the Federated Fund Complex and serves for an indefinite term. The Fund's Statement of Additional Information includes additional information about Trust Trustees and is available, without charge and upon request, by calling 1-800-341-7400.

    Interested Trustees Background

    Name
    Birth Date
    Positions Held with Trust
    Date Service Began
    Principal Occupation(s) for Past Five Years,
    Other Directorships Held and Previous Position(s)
    John F. Donahue*
    Birth Date: July 28, 1924
    TRUSTEE
    Began serving: December 1956
    Principal Occupations: Director or Trustee of the Federated Fund Complex; Chairman and Director, Federated Investors, Inc.; Chairman of the Federated Fund Complex's Executive Committee.
    Previous Positions: Chairman of the Federated Fund Complex; Trustee, Federated Investment Management Company; Chairman and Director, Federated Investment Counseling.
    J. Christopher Donahue*
    Birth Date: April 11, 1949
    PRESIDENT AND TRUSTEE
    Began serving: November 1998
    Principal Occupations: Principal Executive Officer and President of the Federated Fund Complex; Director or Trustee of some of the Funds in the Federated Fund Complex; President, Chief Executive Officer and Director, Federated Investors, Inc.; Chairman and Trustee, Federated Investment Management Company; Trustee, Federated Investment Counseling; Chairman and Director, Federated Global Investment Management Corp.; Chairman, Federated Equity Management Company of Pennsylvania and Passport Research, Ltd. (investment advisory subsidiary of Federated); Trustee, Federated Shareholder Services Company; Director, Federated Services Company.
    Previous Positions: President, Federated Investment Counseling; President and Chief Executive Officer, Federated Investment Management Company, Federated Global Investment Management Corp. and Passport Research, Ltd.

    *Family relationships and reasons for “interested” status: John F. Donahue is the father of J. Christopher Donahue; both are “interested” due to their beneficial ownership of shares of Federated Investors, Inc. and the positions they hold with Federated and its subsidiaries.
    Annual Shareholder Report

    68

    INDEPENDENT Trustees Background

    Name
    Birth Date
    Positions Held with Trust
    Date Service Began
    Principal Occupation(s) for Past Five Years,
    Other Directorships Held and Previous Position(s)
    Thomas G. Bigley
    Birth Date: February 3, 1934
    TRUSTEE
    Began serving: November 1994
    Principal Occupation: Director or Trustee of the Federated Fund Complex.
    Other Directorships Held: Director, Member of Executive Committee, Children's Hospital of Pittsburgh; Director, University of Pittsburgh.
    Previous Position: Senior Partner, Ernst & Young LLP.
    John T. Conroy, Jr., Ph.D.
    Birth Date: June 23, 1937
    TRUSTEE
    Began serving: August 1991
    Principal Occupations: Director or Trustee of the Federated Fund Complex; Chairman of the Board, Investment Properties Corporation; Partner or Trustee in private real estate ventures in Southwest Florida; Assistant Professor in Theology, Blessed Edmund Rice School for Pastoral Ministry.
    Previous Positions: President, Investment Properties Corporation; Senior Vice President, John R. Wood and Associates, Inc., Realtors; President, Naples Property Management, Inc. and Northgate Village Development Corporation.
    Nicholas P. Constantakis
    Birth Date: September 3, 1939
    TRUSTEE
    Began serving: November 1998
    Principal Occupation: Director or Trustee of the Federated Fund Complex.
    Other Directorship Held: Director and Chairman of the Audit Committee, Michael Baker Corporation (architecture, engineering and construction services).
    Previous Position: Partner, Andersen Worldwide SC.
    John F. Cunningham
    Birth Date: March 5, 1943
    TRUSTEE
    Began serving: November 1998
    Principal Occupation: Director or Trustee of the Federated Fund Complex.
    Other Directorships Held: Chairman, President and Chief Executive Officer, Cunningham & Co., Inc. (strategic business consulting); Trustee Associate, Boston College.
    Previous Positions: Director, Redgate Communications and EMC Corporation (computer storage systems); Chairman of the Board and Chief Executive Officer, Computer Consoles, Inc.; President and Chief Operating Officer, Wang Laboratories; Director, First National Bank of Boston; Director, Apollo Computer, Inc.
    Peter E. Madden
    Birth Date: March 16, 1942
    TRUSTEE
    Began serving: August 1991
    Principal Occupation: Director or Trustee, and Chairman of the Board of Directors or Trustees, of the Federated Fund Complex.
    Other Directorship Held: Board of Overseers, Babson College.
    Previous Positions: Representative, Commonwealth of Massachusetts General Court; President, Chief Operating Officer and Director, State Street Bank and Trust Company and State Street Corporation (retired); Director, VISA USA and VISA International; Chairman and Director, Massachusetts Bankers Association; Director, Depository Trust Corporation; Director, The Boston Stock Exchange.
    Annual Shareholder Report
    69

    Name
    Birth Date
    Positions Held with Trust
    Date Service Began
    Principal Occupation(s) for Past Five Years,
    Other Directorships Held and Previous Position(s)
    Charles F. Mansfield, Jr.
    Birth Date: April 10, 1945
    TRUSTEE
    Began serving: November 1998
    Principal Occupations: Director or Trustee and Chairman of the Audit Committee of the Federated Fund Complex; Management Consultant.
    Previous Positions: Chief Executive Officer, PBTC International Bank; Partner, Arthur Young & Company (now Ernst & Young LLP); Chief Financial Officer of Retail Banking Sector, Chase Manhattan Bank; Senior Vice President, HSBC Bank USA (formerly, Marine Midland Bank); Vice President, Citibank; Assistant Professor of Banking and Finance, Frank G. Zarb School of Business, Hofstra University; Executive Vice President DVC Group, Inc. (marketing, communications and technology).
    R. James Nicholson
    Birth Date: February 4, 1938
    TRUSTEE
    Began serving: January 2008
    Principal Occupations: Director or Trustee of the Federated Fund Complex; Senior Counsel, Brownstein Hyatt Farber Schrek, P.C.; Former Secretary of the U.S. Dept. of Veterans Affairs; Former U.S. Ambassador to the Holy See; Former Chairman of the Republican National Committee.
    Other Directorships Held: Director, Horatio Alger Association; Director, The Daniels Fund.
    Previous Positions: Colonel, U.S. Army Reserve; Partner, Calkins, Kramer, Grimshaw and Harring, P.C.; General Counsel, Colorado Association of Housing and Building; Chairman and CEO, Nicholson Enterprises, Inc. (real estate holding company); Chairman and CEO, Renaissance Homes of Colorado.
    Thomas M. O'Neill
    Birth Date: June 14, 1951
    TRUSTEE
    Began serving: October 2006
    Principal Occupations: Director or Trustee of the Federated Fund Complex; Sole Proprietor, Navigator Management Company (investment and strategic consulting).
    Other Directorships Held: Board of Overseers, Children's Hospital of Boston; Visiting Committee on Athletics, Harvard College.
    Previous Positions: Chief Executive Officer and President, Managing Director and Chief Investment Officer, Fleet Investment Advisors; President and Chief Executive Officer, Aeltus Investment Management, Inc.; General Partner, Hellman, Jordan Management Co., Boston, MA; Chief Investment Officer, The Putnam Companies, Boston, MA; Credit Analyst and Lending Officer, Fleet Bank; Director and Consultant, EZE Castle Software (investment order management software); Director, Midway Pacific (lumber).
    John S. Walsh
    Birth Date: November 28, 1957
    TRUSTEE
    Began serving: November 1998
    Principal Occupations: Director or Trustee of the Federated Fund Complex; President and Director, Heat Wagon, Inc. (manufacturer of construction temporary heaters); President and Director, Manufacturers Products, Inc. (distributor of portable construction heaters); President, Portable Heater Parts, a division of Manufacturers Products, Inc.
    Previous Position: Vice President, Walsh & Kelly, Inc.
    Annual Shareholder Report
    70

    Name
    Birth Date
    Positions Held with Trust
    Date Service Began
    Principal Occupation(s) for Past Five Years,
    Other Directorships Held and Previous Position(s)
    James F. Will
    Birth Date: October 12, 1938
    TRUSTEE
    Began serving: April 2006
    Principal Occupations: Director or Trustee of the Federated Fund Complex; formerly, Vice Chancellor and President, Saint Vincent College.
    Other Directorships Held: Trustee, Saint Vincent College; Alleghany Corporation.
    Previous Positions: Chairman, President and Chief Executive Officer, Armco, Inc.; President and Chief Executive Officer, Cyclops Industries; President and Chief Operating Officer, Kaiser Steel Corporation.

    OFFICERS

    Name
    Birth Date
    Address
    Positions Held with Trust
    Date Service Began
    Principal Occupation(s) for Past Five Years
    and Previous Position(s)
    John W. McGonigle
    Birth Date: October 26, 1938
    EXECUTIVE VICE PRESIDENT AND SECRETARY
    Began serving: September 1969
    Principal Occupations: Executive Vice President and Secretary of the Federated Fund Complex; Vice Chairman, Executive Vice President, Secretary and Director, Federated Investors, Inc.
    Previous Positions: Trustee, Federated Investment Management Company and Federated Investment Counseling; Director, Federated Global Investment Management Corp., Federated Services Company and Federated Securities Corp.
    Richard A. Novak
    Birth Date: December 25, 1963
    TREASURER
    Began serving: January 2006
    Principal Occupations: Principal Financial Officer and Treasurer of the Federated Fund Complex; Senior Vice President, Federated Administrative Services; Financial and Operations Principal for Federated Securities Corp., Edgewood Services, Inc. and Southpointe Distribution Services, Inc.
    Previous Positions: Controller of Federated Investors, Inc.; Vice President, Finance of Federated Services Company; held various financial management positions within The Mercy Hospital of Pittsburgh; Auditor, Arthur Andersen & Co.
    Richard B. Fisher
    Birth Date: May 17, 1923
    VICE PRESIDENT
    Began serving: May 1976
    Principal Occupations: Vice Chairman or Vice President of some of the Funds in the Federated Fund Complex; Vice Chairman, Federated Investors, Inc.; Chairman, Federated Securities Corp.
    Previous Positions: President and Director or Trustee of some of the Funds in the Federated Fund Complex; Executive Vice President, Federated Investors, Inc.; Director and Chief Executive Officer, Federated Securities Corp.
    Annual Shareholder Report
    71

    Name
    Birth Date
    Address
    Positions Held with Trust
    Date Service Began
    Principal Occupation(s) for Past Five Years
    and Previous Position(s)
    John B. Fisher
    Birth Date: May 16, 1956
    VICE PRESIDENT
    Began serving: November 2004
    Principal Occupations: President, Director/Trustee and CEO, Federated Advisory Services Company, Federated Equity Management Company of Pennsylvania, Federated Global Investment Management Corp., Federated Investment Counseling, Federated Investment Management Company; President and CEO of Passport Research, Ltd.; President of some of the Funds in the Federated Fund Complex and Director, Federated Investors Trust Company.
    Previous Positions: President and Director of the Institutional Sales Division of Federated Securities Corp.; President and Director of Federated Investment Counseling; Director, Edgewood Securities Corp.; Director, Federated Services Company; Director, Federated Investors, Inc.; Chairman and Director, Southpointe Distribution Services, Inc. and President, Technology, Federated Services Company.
    Brian P. Bouda
    Birth Date: February 28, 1947
    CHIEF COMPLIANCE OFFICER AND SENIOR VICE PRESIDENT
    Began serving: August 2004
    Principal Occupations: Senior Vice President and Chief Compliance Officer of the Federated Fund Complex; Vice President and Chief Compliance Officer of Federated Investors, Inc. and Chief Compliance Officer of its subsidiaries. Mr. Bouda joined Federated in 1999 and is a member of the American Bar Association and the State Bar Association of Wisconsin.
    Stephen F. Auth
    Birth Date: September 3, 1956
    450 Lexington Avenue
    Suite 3700
    New York, NY 10017-3943
    CHIEF INVESTMENT OFFICER
    Began serving: November 2002
    Principal Occupations: Mr. Auth is Chief Investment Officer of this Fund and various other Funds in the Federated Fund Complex; Executive Vice President, Federated Investment Counseling, Federated Global Investment Management Corp. and Federated Equity Management Company of Pennsylvania.
    Previous Positions: Executive Vice President, Federated Investment Management Company, and Passport Research, Ltd. (investment advisory subsidiary of Federated); Senior Vice President, Global Portfolio Management Services Division; Senior Vice President, Federated Investment Management Company and Passport Research, Ltd.; Senior Managing Director and Portfolio Manager, Prudential Investments.

    Annual Shareholder Report

    72

    Evaluation and Approval of Advisory Contract - May 2009

    Federated Stock and Bond Fund (the “Fund”)

    The Fund's Board reviewed the Fund's investment advisory and subadvisory contracts at meetings held in May 2009. The Board's decision regarding these contracts reflects the exercise of its business judgment on whether to continue the existing arrangements.

    In this connection, the Federated funds' Board had previously appointed a Senior Officer, whose duties include specified responsibilities relating to the process by which advisory fees are to be charged to a Federated fund. The Senior Officer has the authority to retain consultants, experts, or staff as may be reasonably necessary to assist in the performance of his duties, reports directly to the Board, and may be terminated only with the approval of a majority of the independent members of the Board. The Senior Officer prepared and furnished to the Board an independent, written evaluation that covered topics discussed below. The Board considered that evaluation, along with other information, in deciding to approve the advisory and subadvisory contracts.

    During its review of these contracts, the Board considered compensation and benefits received by the Adviser and subadviser. This included the fees received for services provided to the Fund by other entities in the Federated organization and research services received by the Adviser from brokers that execute Federated fund trades, as well as advisory fees. The Board is also familiar with and considered judicial decisions concerning allegedly excessive investment advisory fees, which have indicated that the following factors may be relevant to an Adviser's fiduciary duty with respect to its receipt of compensation from a fund: the nature and quality of the services provided by the Adviser, including the performance of the fund; the Adviser's cost of providing the services; the extent to which the Adviser may realize “economies of scale” as a fund grows larger; any indirect benefits that may accrue to the Adviser and its affiliates as a result of the Adviser's relationship with a fund; performance and expenses of comparable funds; and the extent to which the independent Board members are fully informed about all facts the Board deems relevant bearing on the Adviser's services and fees. The Board further considered management fees (including any components thereof) charged to institutional and other clients of the Adviser and subadviser for what might be viewed as like services, and the cost to the Adviser and its affiliates of supplying services pursuant to the management fee agreements, excluding any intra-corporate profit and profit margins of the Adviser and its affiliates for supplying such services. The Board was aware of these factors and was guided by them in its review of the Fund's advisory and subadvisory contracts to the extent it considered them to be appropriate and relevant, as discussed further below.

    Annual Shareholder Report
    73

    The Board considered and weighed these circumstances in light of its substantial accumulated experience in governing the Fund and working with Federated on matters relating to the Federated funds, and was assisted in its deliberations by independent legal counsel. Throughout the year, the Board has requested and received substantial and detailed information about the Fund and the Federated organization that was in addition to the extensive materials that comprise and accompany the Senior Officer's evaluation. Federated provided much of this information at each regular meeting of the Board, and furnished additional reports in connection with the particular meeting at which the Board's formal review of the advisory and subadvisory contracts occurred. Between regularly scheduled meetings, the Board also received information on particular matters as the need arose. Thus, the Board's consideration of the advisory and subadvisory contracts included review of the Senior Officer's evaluation, accompanying data and additional reports covering such matters as: the Adviser's and subadviser's investment philosophy, revenue, profitability, personnel and processes; investment and operating strategies; the Fund's short- and long-term performance (in absolute terms, both on a gross basis and net of expenses, as well as in relationship to its particular investment program and certain competitor or “peer group” funds and/or other benchmarks, as appropriate), and comments on the reasons for performance; the Fund's investment objectives; the Fund's expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for contractual or voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities (if any); and the nature, quality and extent of the advisory and other services provided to the Fund by the Adviser and its affiliates. The Board also considered the preferences and expectations of Fund shareholders and their relative sophistication; the continuing state of competition in the mutual fund industry and market practices; the range of comparable fees for similar funds in the mutual fund industry; the Fund's relationship to the Federated family of funds which include a comprehensive array of funds with different investment objectives, policies and strategies which are available for exchange without the incurrence of additional sales charges; compliance and audit reports concerning the Federated funds and the Federated companies that service them (including communications from regulatory agencies), as well as Federated's responses to any issues raised therein; and relevant developments in the mutual fund industry and how the Federated funds and/or Federated are responding to them. The Board's evaluation process is evolutionary. The criteria considered and the emphasis placed on relevant criteria change in recognition of changing circumstances in the mutual fund marketplace. Annual Shareholder Report
    74

    With respect to the Fund's performance and expenses in particular, the Board has found the use of comparisons to other mutual funds with comparable investment programs to be particularly useful, given the high degree of competition in the mutual fund business. The Board focused on comparisons with other similar mutual funds more heavily than non-mutual fund products or services because it is believed that they are more relevant. For example, other mutual funds are the products most like the Fund, they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle in fact chosen and maintained by the Fund's investors. The range of their fees and expenses therefore appears to be a generally reliable indication of what consumers have found to be reasonable in the precise marketplace in which the Fund competes. The Fund's ability to deliver competitive performance when compared to its peer group was a useful indicator of how the Adviser is executing the Fund's investment program, which in turn assisted the Board in reaching a conclusion that the nature, extent, and quality of the Adviser's investment management services were such as to warrant continuation of the advisory contract. In this regard, the Senior Officer has reviewed Federated's fees for providing advisory services to products outside the Federated family of funds (e.g., institutional and separate accounts). He concluded that mutual funds and institutional accounts are inherently different products. Those differences include, but are not limited to, different types of targeted investors; being subject to different laws and regulations; different legal structures; different average account sizes; different associated costs; different portfolio management techniques made necessary by different cash flows; and portfolio manager time spent in review of securities pricing. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund advisory contracts.

    The Senior Officer reviewed reports compiled by Federated, using data supplied by independent fund ranking organizations, regarding the performance of, and fees charged by, other mutual funds, noting his view that comparisons to fund peer groups are highly important in judging the reasonableness of proposed fees.

    For the one-year, three-year and five-year periods covered by the report, the Fund's performance was above the median of the relevant peer group.

    The Board also received financial information about Federated, including reports on the compensation and benefits Federated derived from its relationships with the Federated funds. These reports covered not only the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds' administrator). The reports also discussed any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades. In addition, the Board considered the fact that, in order for a fund to be competitive in the marketplace, Federated and its affiliates frequently waived fees and/or Annual Shareholder Report
    75

    reimbursed expenses and have disclosed to fund investors and/or indicated to the Board their intention to do so in the future, where appropriate. Moreover, the Board receives regular reports regarding the institution or elimination of these voluntary waivers.

    Federated furnished reports, requested by the Senior Officer, that reported revenues on a fund-by-fund basis and made estimates of the allocation of expenses on a fund-by-fund basis, using allocation methodologies specified by the Senior Officer. The Senior Officer noted that, although they may apply consistent allocation processes, the inherent difficulties in allocating costs (and the unavoidable arbitrary aspects of that exercise) and the lack of consensus on how to allocate those costs may render such allocation reports unreliable. The allocation reports were considered in the analysis by the Board but were determined to be of limited use.

    The Board and the Senior Officer also reviewed a report compiled by Federated comparing profitability information for Federated to other publicly held fund management companies. In this regard, the Senior Officer noted the limited availability of such information, but nonetheless concluded that Federated's profit margins did not appear to be excessive and the Board agreed.

    The Senior Officer's evaluation also discussed the notion of possible realization of “economies of scale” as a fund grows larger. The Board considered in this regard that the Adviser has made significant and long-term investments in areas that support all of the Federated funds, such as personnel and processes for the portfolio management, compliance, and risk management functions; and systems technology; and that the benefits of these efforts (as well as any economies, should they exist) were likely to be enjoyed by the fund complex as a whole. Finally, the Board also noted the absence of any applicable regulatory or industry guidelines on this subject, which (as discussed in the Senior Officer's evaluation) is compounded by the lack of any common industry practice or general pattern with respect to structuring fund advisory fees with “breakpoints” that serve to reduce the fee as the fund attains a certain size. The Senior Officer did not recommend institution of breakpoints in pricing Federated's fund advisory services at this time.

    It was noted in the materials for the Board meeting that for the period covered by the report, the Fund's investment advisory fee, after waivers and expense reimbursements, if any, was above the median of the relevant peer group. The Board reviewed the fees and other expenses of the Fund with the Adviser and was satisfied that the overall expense structure of the Fund remained competitive. The Board will continue to monitor advisory fees and other expenses borne by the Fund.

    The Senior Officer's evaluation noted his belief that the information and observations contained in his evaluation supported a finding that the proposed management fees are reasonable, and that Federated appeared to provide appropriate administrative services to the Fund for the fees paid. Under these Annual Shareholder Report
    76

    circumstances, no changes were recommended to, and no objection was raised to, the continuation of the Fund's advisory and subadvisory contracts. The Board concluded that the nature, quality and scope of services provided the Fund by the Adviser and its affiliates were satisfactory.

    In its decision to continue an existing investment advisory contract, the Board was mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew an advisory contract. In particular, the Board recognized that many shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and with the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's approval of the advisory contract reflected the fact that it is the shareholders who have effectively selected the Adviser by virtue of having invested in the Fund.

    The Board based its decision to approve the advisory and subadvisory contracts on the totality of the circumstances and relevant factors and with a view to past and future long-term considerations. Not all of the factors and considerations identified above were necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.

    Annual Shareholder Report
    77

    Voting Proxies on Fund Portfolio Securities

    A description of the policies and procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. A report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available from Federated's Web site at FederatedInvestors.com. To access this information from the “Products” section of the Web site, click on the “Prospectuses and Regulatory Reports” link under “Related Information,” then select the appropriate link opposite the name of the Fund; or select the name of the Fund and from the Fund's page, click on the “Prospectuses and Regulatory Reports” link. Form N-PX filings are also available at the SEC's Web site at www.sec.gov.

    Quarterly Portfolio Schedule

    The Fund files with the SEC a complete schedule of its portfolio holdings, as of the close of the first and third quarters of its fiscal year, on “Form N-Q.” These filings are available on the SEC's Web site at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. (Call 1-800-SEC-0330 for information on the operation of the Public Reference Room.) You may also access this information from the “Products” section of Federated's Web site at FederatedInvestors.com by clicking on “Portfolio Holdings” under “Related Information,” then selecting the appropriate link opposite the name of the Fund; or select the name of the Fund and from the Fund's page, click on the “Portfolio Holdings” link.

    Annual Shareholder Report
    78

    Mutual funds are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal.

    This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund's Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.

    Federated Stock and Bond Fund
    Federated Investors Funds
    4000 Ericsson Drive
    Warrendale, PA 15086-7561

    Contact us at FederatedInvestors.com
    or call 1-800-341-7400.

    Federated Securities Corp., Distributor

    Cusip 313911109
    Cusip 313911208
    Cusip 313911307
    Cusip 313911406

    G01454-01 (1/10)

    Federated is a registered mark of Federated Investors, Inc.
    2010 Federated Investors, Inc.


    Federated Stock and Bond Fund


    ANNUAL SHAREHOLDER REPORT

    November 30, 2009

    Institutional Shares

    FINANCIAL HIGHLIGHTS
    SHAREHOLDER EXPENSE EXAMPLE
    MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
    PORTFOLIO OF INVESTMENTS SUMMARY TABLES
    PORTFOLIO OF INVESTMENTS
    STATEMENT OF ASSETS AND LIABILITIES
    STATEMENT OF OPERATIONS
    STATEMENT OF CHANGES IN NET ASSETS
    NOTES TO FINANCIAL STATEMENTS
    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

    BOARD OF TRUSTEES AND TRUST OFFICERS
    EVALUATION AND APPROVAL OF ADVISORY CONTRACT
    VOTING PROXIES ON FUND PORTFOLIO SECURITIES
    QUARTERLY PORTFOLIO SCHEDULE


    Financial Highlights - Institutional Shares

    (For a Share Outstanding Throughout the Period)

    Period Ended November 3020091
    Net Asset Value, Beginning of Period$14.06
    Income From Investment Operations:
    Net investment income0.13
    Net realized and unrealized gain on investments, futures contracts, swap contracts and foreign currency transactions1.56
    TOTAL FROM INVESTMENT OPERATIONS1.69
    Less Distributions:
    Distributions from net investment income(0.10)
    Net Asset Value, End of Period$15.65
    Total Return212.07%
    Ratios to Average Net Assets:
    Net expenses1.00%3,4
    Net investment income1.91%4
    Expense waiver/reimbursement50.13%4
    Supplemental Data:
    Net assets, end of period (000 omitted)$2,776
    Portfolio turnover254%6
    1Reflects operations for the period from June 12, 2009 (date of initial investment) to November 30, 2009.
    2Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized.
    3The net expense ratio is calculated without reduction for expense offset arrangements. The net expense ratio is 1.00% for the period ended November 30, 2009, after taking into account this expense reduction.
    4Computed on an annualized basis.
    5This expense decrease is reflected in both the net expense and the net investment income ratios shown above.
    6Portfolio turnover is calculated at the Fund level. Percentage indicated was calculated for the year ended November 30, 2009.

    • See Notes which are an integral part of the Financial Statements
    Annual Shareholder Report
    1

    Shareholder Expense Example (unaudited)

    As a shareholder of the Fund, you incur ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or shareholder services fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from June 1, 20091 to November 30, 2009.

    ACTUAL EXPENSES

    The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses attributable to your investment during this period.

    HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

    The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are required to be provided to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

    Annual Shareholder Report
    2

    Please note that the expenses shown in the table are meant to highlight your ongoing costs only. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
    Beginning
    Account Value
    6/1/2009
    Ending
    Account Value
    11/30/2009
    Expenses Paid
    During Period1
    Actual$1,000$1,120.70$5.00
    Hypothetical (assuming a 5% return
    before expenses)
    $1,000$1,020.05$5.06
    1“Actual” expense information for the Fund's Institutional Shares is for the period from June 12, 2009 (date of initial investment) to November 30, 2009. Actual expenses are equal to the annualized net expense ratio of 1.00%, multiplied by 172/365 (to reflect the period from initial investment to November 30, 2009). “Hypothetical” expense information is presented on the basis of the full one-half year period to enable comparison to other funds. It is based on assuming the same net expense ratio and average account value over the period, but is multiplied by 183/365 (to reflect the full half-year-period).
    Annual Shareholder Report
    3

    Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Mutual fund performance changes over time and current performance may be lower or higher than what is stated. For current to the most recent month-end performance and after-tax returns, visit FederatedInvestors.com or call 1-800-341-7400.

    Management's Discussion of Fund
    Performance (unaudited)

    For the fiscal year ended November 30, 2009, the Fund's Institutional Shares produced a total return of 12.07% at net asset value.1 That compares with a 23.09% return for the Fund's Blended Index (as described below) and 26.15% for Morningstar's Moderate Allocation Funds Category Average.2 The Fund's Blended Index is comprised of 50% of the return of the Russell 3000 Index,3 10% of the return of the MSCI All Country World ex-U.S. Index4 and 40% of the return of the Barclays Capital U.S. Universal Index5 which had total returns of 27.17%, 46.44% and 14.18%, respectively, during the reporting period. The Fund's total return for the fiscal year reflected actual cash flows, transaction costs and other expenses which were not reflected in the total return data of the indices.

    1 Reflects the reporting period of June 12, 2009 (date of initial public investment) through November 30, 2009
    2 Morningstar's Moderate Allocation is the category of funds which seek to provide both capital appreciation and income by investing in stocks, bonds and cash. These funds typically invest between 50% to 70% of assets in equities and the remainder in fixed income and cash. Investments cannot be made in an average.
    3 The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market. The Russell 3000 Index is constructed to provide a comprehensive, unbiased, and stable barometer of the broad market and is completely reconstituted annually to ensure new and growing equities are reflected.
    4 The MSCI ACWI (All Country World Index) ex-U.S. Index is a free float-adjusted, market capitalization-weighted index that is designed to measure the equity market performance of developed and emerging markets. As of June 2009 the MSCI ACWI consisted of 44 country indices comprising 22 developed and 22 emerging market country indices.
    5 The Barclays Capital U.S. Universal Index represents the union of the U.S. Aggregate Index, U.S. Corporate High-Yield, Investment Grade 144A Index, Eurodollar Index, U.S. Emerging Markets Index, and the non-ERISA eligible portion of the CMBS Index. The index covers USD- denominated, taxable bonds that are rated either investment-grade or below investment-grade.
    Annual Shareholder Report
    4

    MARKET OVERVIEW

    Domestic Equities

    Domestic equities, as measured by the S&P 500 Index6 (S&P 500), experienced substantial volatility throughout the reporting period. The fiscal year began with markets reeling from the fall-out caused by the failure of Lehman Brothers. With the credit crisis, the S&P 500 moved sharply lower, losing nearly 25% between the start of the fiscal year and the market bottom on March 9, 2009. In response to frozen credit markets, bank failures and rapidly deteriorating macroeconomic fundamentals, the Federal Reserve cut interest rates to a range between 0% and 0.25% at the December 16, 2008, Federal Open Market Committee meeting before eventually implementing a program of quantitative easing. Likewise, Congress supported the banking sector via the Troubled Asset Relief Program (TARP) while also passing a $787 billion stimulus plan. These measures, combined with aggressive cost cutting by corporations, led to better-than-expected earnings results in both the second and third quarters of 2009. As a result, the S&P 500 rallied 62% off of the March 9, 2009 low to finish the fiscal year up 22.25% (up 25.39% on a total return basis). Eight out of 10 sectors posted positive returns. The three best-performing S&P 500 sectors were: Information Technology, 54.0%; Materials, 42.1%; and Consumer Discretionary, 39.8%. The three lagging sectors were: Telecommunication Services, (1.0)%; Utilities, (1.0)%; and Energy, 7.81%.

    6The S&P 500 Index is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The index is unmanaged and, unlike the Fund, is not affected by cash flows. Investments cannot be made directly in an index.
    Annual Shareholder Report
    5

    International Equities7

    World markets followed a similar path as the United States. Equity markets experienced severe weakness in the opening months of the fiscal year, but rebounded as world governments enacted a wide range of economic bailout measures including the guaranteeing of bank deposits and money market investments, direct investment into financial institutions, nationalization of failing banks, direct purchases of commercial paper and economic stimulus plans. Several countries, including Iceland, Ukraine, Hungary, Belarus and Pakistan, bordered on collapse and required emergency International Monetary Fund bailout packages. As equity markets recovered, emerging markets outperformed significantly. With substantially less exposure to toxic assets, relatively benign debt levels and better demographic and macroeconomic fundamentals, investors poured into emerging markets. As such, the MSCI Emerging Markets Index8 finished the fiscal year with a return of 85.12%. Foreign currencies appreciated against the U.S. dollar in response to aggressive monetary policy and record fiscal deficits. The euro appreciated 18.3%, the sterling rose 6.9% and the yen gained 10.5% against the U.S. dollar during the reporting period.

    Interest Rates

    Interest rates were mixed over the reporting period, as shorter maturity yields fell while longer maturity yields rose. Long-term rates rose on increasing worries about a pickup of inflation on aggressive monetary easing. Spread bonds, on the other hand, performed well on expectations that credit-related bonds would do well in a growing economic environment.

    The two-year Treasury yield fell 0.31% over the past 12 months and finished the reporting period at 0.66%, while the 30-year Treasury yield rose 0.76% in the period to finish at 4.19%. The yield to worst of the Barclay's Capital U.S. Aggregate Bond Index9 stood at 3.40% on November 30, 2009, compared to 4.96% 12 months earlier.

    7 International investing involves special risks including currency risk, increased volatility of foreign securities, political risks and differences in auditing and other financial standards.
    8 The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. As of June 2009 the MSCI Emerging Markets Index consisted of the following 22 emerging market country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey.
    9 The Barclay's Capital U.S. Aggregate Bond Index is an unmanaged index composed of securities from the Barclay's Capital Government/Corporate Bond Index, Mortgage-Backed Securities Index and the Asset-Backed Securities Index. Total return comprises price appreciation/depreciation and income as a percentage of the original investment. Investments cannot be made directly in an index.
    Annual Shareholder Report
    6

    Fund Performance

    Asset Allocation Strategy Performance

    For the reporting period, overall asset allocation strategy added to performance, primarily due to the Fund's successful domestic equity industry group weighting decisions. Likewise, the Fund also benefitted from global developed country allocation decisions. The main detractors from performance included the Fund's market capitalization allocation and the stock-versus-bond allocation. Despite strong absolute returns, U.S. small caps underperformed large caps for the fiscal year, thus detracting from relative performance. Additionally, markets faced severe shifts in macroeconomic fundamentals, and the Fund overweighted stocks too early in the cycle. The Fund was overweight equities at the beginning of the year, which negatively impacted performance as markets continued to sell-off before bottoming on March 9, 2009.

    Domestic Equities Performance

    In the equity portion of the Fund, a focus on high quality in a strong low quality rally was the primary driver of the Fund's relative underperformance.

    The Fund was most negatively impacted from stock selection in Consumer Discretionary, Health Care and Consumer Staples. The stocks that were the largest detractors from performance were:

    ●Cephalon Inc., a biopharmaceutical company which engages in the discovery, development, and commercialization of products for the central nervous system, inflammatory diseases, pain, and oncology therapeutic areas. In general, health care stocks underperformed during the fiscal year as investors preferred more cyclical names during the stock market recovery. Uncertainties surrounding possible health care reform in the United States also affected the sector. Cephalon, Inc. was down 25.60% for the period.

    ●JetBlue Airways Corp., which provides passenger air transportation services in the United States. The stock was negatively impacted by a significant slowdown in consumer spending due to the credit and housing crises. For the reporting period, the stock lost 52.17%.

    ●Lowe's Companies, Inc., which, together with its subsidiaries, operates as a home improvement retailer in the United States and Canada. The firm was hurt by the precipitous decline in the real estate market as well as a sharp slowdown in consumer spending. The stock was down 24.96% over the reporting period.

    On the positive side, the Fund benefitted from stock selection decisions in Energy, Materials and Financials. The stocks that aided relative performance included:

    ●The Goldman Sachs Group, Inc., a bank holding company, specializing in investment banking, trading and principal investments, asset management and securities services. The firm benefitted from being the first U.S. bank to repay TARP loans and was up 117.43% for the period.

    Annual Shareholder Report
    7

    Petroleo Brasileiro SA, based in Brazil, explores for and produces oil and natural gas. The firm benefitted from a recovery in oil prices as well as its exposure to emerging markets. The stock was up 109.66% for the fiscal year.

    ●EMC Corp/Massachusetts, which provides enterprise storage systems, software, networks and services. The stock rallied as cyclical sectors, like information technology, led the recovery off of the March 9th lows. The stock was up 59.22% for the period.

    Fixed-Income Performance10

    The bond portion of the Fund outperformed its benchmark by a significant margin during the 12-month reporting period due mostly to sector management. Currency management had a very slight benefit. Duration11 management detracted from performance, and security selection in total had a slight negative impact on performance. Sector calls helped performance due to a considerable overweight in residential Mortgage Backed Securities, Commercial Mortgage-Backed Securities (CMBS), emerging markets and corporates (both investment-grade & high-yield corporates). Security selection was a significant positive for performance in the CMBS sector while the Federated Emerging Market Core Fund, The High Yield Bond Fund, and Federated Mortgage-Backed Securities Fund portfolios were a drag on performance. Security selection detracted from relative performance in the investment-grade sector. Union Central Life, Regional Diversified, Pacific Life and the Camp Pendelton bonds each underperformed in the past year, while the Textron Trust Preferred Securities, Prologis, AXA Financial and Enterprise Rent-A-Car were good performers, offsetting some of the drag from overall security selection.

    10 Bond prices are sensitive to changes in interest rates and a rise in interest rates can cause a decline in their prices.
    11 Duration is a measure of a security's price sensitivity to changes in interest rates. Securities with longer durations are more sensitive to changes in interest rates than securities of shorter duration.
    Annual Shareholder Report
    8

    GROWTH OF A $10,000 INVESTMENT - INSTITUTIONAL SHARES

    The Fund's Institutional Shares commenced operations on June 12, 2009. The Fund offers four other classes of shares: Class A Shares, Class B Shares, Class C Shares and Class K Shares. For the period prior to the commencement of operations of the Institutional Shares, the performance information shown is for the Fund's Class A Shares, adjusted to reflect the expenses of Institutional Shares. The graph below illustrates the hypothetical investment of $10,0001 in Federated Stock and Bond Fund (Institutional Shares) (the “Fund”) from October 31, 1999 to November 30, 2009, compared to a blend of indexes comprised of 50% of the Russell 3000 Index (RU3000),2 10% of the MSCI All Country World ex US Index (MSCI ACWI ex US)2 and 40% of the Barclays Capital U.S. Universal Index (BCUSU)2 (the “Blended Index”),2 the Standard and Poor's 500 Index (S&P 500)2, the Barclays Capital Aggregate Bond Index (BCAB)2 and the Lipper Balanced Funds Average (LBFA).3

    Average Annual Total Returns for the Period Ended 11/30/2009
    1 Year 21.80%
    5 Years3.08%
    10 Years3.11%

    Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Mutual fund performance changes over time and current performance may be lower or higher than what is stated. For current to the most recent month-end performance and after-tax returns, visit FederatedInvestors.com or call 1-800-341-7400. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Mutual funds are not obligations of or guaranteed by any bank and are not federally insured.

    Annual Shareholder Report
    9

    1Represents a hypothetical investment of $10,000 in the Fund. The Fund's performance assumes the reinvestment of all dividends and distributions. The Blended Index, S&P 500, BCAB and LBFA have been adjusted to reflect reinvestment of dividends on securities in the indexes and the average.
    2The Blended Index is a custom blended index comprised of the 50% of the RU3000, 10% of the MSCI ACWI ex US and 40% of the BCUSU. The RU3000 measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market. The Russell 3000 Index is constructed to provide a comprehensive, unbiased and stable barometer of the broad market and is completely reconstituted annually to ensure new and growing equities are reflected. The MSCI ACWI ex US is a free float-adjusted, market capitalization-weighted index that is designed to measure the equity market performance of developed and emerging markets. As of June 2009, the MSCI ACWI consisted of 44 country indices comprising 22 developed and 22 emerging market country indices. The BCUSU represents the union of the U.S. Aggregate Index, U.S. Corporate High-Yield, Investment Grade 144A Index, Eurodollar Index, U.S. Emerging Markets Index and the non-ERISA eligible portion of the CMBS Index. The index covers USD-denominated, taxable bonds that are rated either investment-grade or below investment-grade. The S&P 500 is an unmanaged, capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The BCAB is an unmanaged index composed of securities from the Barclay's Capital Government/Corporate Bond Index, Mortgage-Backed Securities Index and the Asset-Backed Securities Index. The RU3000, MSCI ACWI ex US, BCUSU, S&P 500 and BCAB are not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in the Fund's performance. The indexes are unmanaged and, unlike the Fund, are not affected by cash flows. It is not possible to invest directly in an index.
    3The LBFA represents the average of the total returns reported by all of the mutual funds designated by Lipper, Inc. as falling into the category indicated, and is not adjusted to reflect any sales charges. However, these total returns are reported net of expenses or other fees that the SEC requires to be reflected in the Fund's performance.
    Annual Shareholder Report
    10

    Portfolio of Investments Summary Tables (unaudited)

    At November 30, 2009, the Fund's portfolio composition1 was as follows:

    Portfolio CompositionPercentage of
    Total Net Assets2
    Domestic Equity Securities53.7%
    Corporate Debt Securities11.8%
    International Equity Securities7.2%
    U.S. Treasury and Agency Securities5.8%
    Mortgage-Backed Securities34.8%
    Foreign Debt Securities1.6%
    Asset-Backed Securities0.9%
    Municipal Security40.0%
    Derivative Contracts50.2%
    Cash Equivalents614.8%
    Other Assets and Liabilities — Net7(0.8)%
    TOTAL 100%
    1See the Fund's Prospectus and Statement of Additional Information for a description of these security types.
    2As of the date specified above, the Fund owned shares of one or more affiliated investment companies. For purposes of this table, the affiliated investment company (other than an affiliated money market mutual fund) is not treated as a single portfolio security, but rather the Fund is treated as owning a pro rata portion of each security and each other asset and liability owned by the affiliated investment company. Accordingly, the percentages of total net assets shown in the table will differ from those presented on the Portfolio of Investments.
    3For purposes of this table, Mortgage-Backed Securities include mortgage-backed securities guaranteed by Government Sponsored Entities and adjustable rate mortgage-backed securities.
    4Represents less than 0.1%.
    5Based upon net unrealized appreciation (depreciation) or value of the derivative contracts as applicable. Derivative contracts may consist of futures, forwards, options and swaps. The impact of a derivative contract on the Fund's performance may be larger than its unrealized appreciation (depreciation) or value may indicate. In many cases, the notional value or amount of a derivative contract may provide a better indication of the contract's significance to the portfolio. More complete information regarding the Fund's direct investments in derivative contracts, including unrealized appreciation (depreciation), value and notional values or amounts of such contracts, can be found in the table at the end of the Portfolio of Investments included in this report.
    6Cash Equivalents include any investments in money market mutual funds and/or overnight repurchase agreements.
    7Assets, other than investments in securities and derivative contracts, less liabilities. See Statement of Assets and Liabilities.
    Annual Shareholder Report
    11

    At November 30, 2009, the Fund's sector composition8 was as follows:

    Sector Composition of Equity HoldingsPercentage of
    Equity Securities
    Information Technology21.8%
    Financials15.0%
    Consumer Staples14.7%
    Industrials11.3%
    Energy8.7%
    Materials8.7%
    Health Care8.6%
    Consumer Discretionary5.9%
    Utilities5.3%
    TOTAL100.0%
    8Sector classifications are based upon, and individual portfolio securities are assigned to, the classifications of the Global Industry Classification Standard (GICS) except that the Adviser assigns a classification to securities not classified by the GICS and to securities for which the Adviser does not have access to the classification made by the GICS.
    Annual Shareholder Report
    12

    Portfolio of Investments

    November 30, 2009

    Shares or
    Principal
    Amount
    Value in
    U.S. Dollars
    Common Stocks – 37.7%
    Consumer Discretionary – 2.2%
    3,3921Apollo Group, Inc., Class A193,581
    8,870Block (H&R), Inc.180,061
    11,585Carnival Corp.371,068
    11,5001Coach, Inc.399,625
    9,400Dollar General Corp.216,200
    10,4401Gymboree Corp.416,765
    7,659International Game Technology144,679
    1,0001Lear Corp.62,990
    6,760Marriott International, Inc., Class A173,866
    33,383McDonald's Corp.2,111,475
    19,2981Starbucks Corp.422,626
    5,084Starwood Hotels & Resorts162,790
    5,402Target Corp.251,517
    12,393Yum! Brands, Inc.437,101
    TOTAL5,544,344
    Consumer Staples – 5.6%
    35,420Altria Group, Inc.666,250
    10,956Archer-Daniels-Midland Co.337,554
    15,221Avon Products, Inc.521,319
    3,502Colgate-Palmolive Co.294,833
    7,694ConAgra Foods, Inc.170,730
    13,130General Mills, Inc.892,840
    5,449Heinz (H.J.) Co.231,310
    14,819Kellogg Co.779,183
    2,846Kimberly-Clark Corp.187,751
    25,378Kraft Foods, Inc., Class A674,547
    17,337Kroger Co.394,243
    2,845Lorillard, Inc.221,654
    2,674Molson Coors Brewing Co., Class B120,892
    11,114Nestle SA525,749
    26,917PepsiCo, Inc.1,674,776
    32,612Philip Morris International Inc.1,568,311
    23,712Procter & Gamble Co.1,478,443
    2,925Reynolds American, Inc.146,133
    Annual Shareholder Report
    13

    Shares or
    Principal
    Amount
    Value in
    U.S. Dollars
    39,758The Coca-Cola Co.2,274,158
    11,540Wal-Mart Stores, Inc.629,507
    TOTAL13,790,183
    Energy – 3.3%
    2,429Anadarko Petroleum Corp.144,598
    4,948Apache Corp.471,446
    3,100CONSOL Energy, Inc.142,352
    3,250Chesapeake Energy Corp.77,740
    22,479Chevron Corp.1,754,261
    7,483ConocoPhillips387,395
    2,216Devon Energy Corp.149,248
    1,263EOG Resources, Inc.109,237
    32,496Exxon Mobil Corp.2,439,475
    4,529Halliburton Co.132,971
    1,464Hess Corp.84,853
    3,540Marathon Oil Corp.115,475
    271NRG Energy, Inc.646
    2,0801National-Oilwell, Inc.89,482
    873Noble Energy, Inc.56,963
    4,017Occidental Petroleum Corp.324,533
    13,900Schlumberger Ltd.888,071
    1,6921Southwestern Energy Co.74,380
    3,207Spectra Energy Corp.62,248
    2,9491Transocean Ltd.251,815
    9,195XTO Energy, Inc.390,236
    TOTAL8,147,425
    Financials – 5.6%
    2,845AON Corp.110,187
    6,500Ace, Ltd.316,615
    4,900Aflac, Inc.225,547
    5,571Allstate Corp.158,272
    11,712American Express Co.489,913
    1,238Avalonbay Communities, Inc.89,433
    1,136BB&T Corp.28,286
    111,252Bank of America Corp.1,763,344
    2,137Boston Properties, Inc.143,136
    663CME Group, Inc.217,616
    Annual Shareholder Report
    14

    Shares or
    Principal
    Amount
    Value in
    U.S. Dollars
    4,381Capital One Financial Corp.168,055
    3,583Chubb Corp.179,652
    134,849Citigroup, Inc.554,229
    4,231Equity Residential Properties Trust136,280
    1,341Fifth Third Bancorp13,517
    1,486Franklin Resources, Inc.160,533
    8,155Goldman Sachs Group, Inc.1,383,577
    4,471HCP Inc.139,942
    3,974Hartford Financial Services Group, Inc.97,204
    1,832Health Care REIT, Inc.81,616
    9,478Host Hotels & Resorts, Inc.99,709
    834Hudson City Bancorp, Inc.11,084
    55,088J.P. Morgan Chase & Co.2,340,689
    3,208Lincoln National Corp.73,495
    3,699Loews Corp.131,019
    5,472Marsh & McLennan Cos., Inc.123,394
    8,744MetLife, Inc.298,957
    13,754Morgan Stanley434,351
    789PNC Financial Services Group44,981
    3,343Principal Financial Group84,879
    6,976Progressive Corp. Ohio116,988
    6,750Prologis Trust88,290
    4,722Prudential Financial235,392
    2,086Public Storage166,004
    2,073Regions Financial Corp.12,148
    9,599Schwab (Charles) Corp.175,950
    4,339Simon Property Group, Inc.315,272
    4,937State Street Corp.203,898
    867SunTrust Banks, Inc.20,487
    8,700T. Rowe Price Group, Inc.425,691
    12,010The Bank of New York Mellon Corp.319,946
    15,372The Travelers Cos, Inc.805,339
    19,306U.S. Bancorp465,854
    3,434Unum Group65,383
    2,390Ventas, Inc.102,603
    2,383Vornado Realty Trust155,991
    Annual Shareholder Report
    15

    Shares or
    Principal
    Amount
    Value in
    U.S. Dollars
    8,168Wells Fargo & Co.229,031
    TOTAL14,003,779
    Health Care – 3.2%
    17,094Abbott Laboratories931,452
    3,651Aetna, Inc.106,281
    3,0091Amgen, Inc.169,557
    819Bard (C.R.), Inc.67,330
    11,086Baxter International, Inc.604,741
    2,002Becton, Dickinson & Co.149,750
    12,5471Boston Scientific Corp.105,018
    5,753Bristol-Myers Squibb Co.145,608
    2,292CIGNA Corp.73,527
    2,993Cardinal Health, Inc.96,464
    1,3521Celgene Corp.74,968
    4,6001Cephalon, Inc.252,770
    2,2261Express Scripts, Inc., Class A190,991
    2,6231Gilead Sciences, Inc.120,789
    1,4551Humana, Inc.60,397
    3191Intuitive Surgical, Inc.89,492
    16,378Johnson & Johnson1,029,194
    9041Laboratory Corp. of America Holdings65,956
    2,922Lilly (Eli) & Co.107,325
    2,208McKesson HBOC, Inc.136,940
    3,9031Medco Health Solutions, Inc.246,514
    9,232Medtronic, Inc.391,806
    18,731Merck & Co., Inc.678,234
    52,157Pfizer, Inc.947,693
    1,311Quest Diagnostics, Inc.75,959
    2,8861St. Jude Medical, Inc.105,945
    2,341Stryker Corp.117,986
    1,1961Thermo Fisher Scientific Inc.56,487
    16,935UnitedHealth Group, Inc.485,527
    3,9441Wellpoint, Inc.213,094
    1,8091Zimmer Holdings, Inc.107,039
    TOTAL8,004,834
    Industrials – 4.3%
    9,2303M Co.714,771
    Annual Shareholder Report
    16

    Shares or
    Principal
    Amount
    Value in
    U.S. Dollars
    682Avery Dennison Corp.25,616
    5,967Boeing Co.312,730
    1,594Burlington Northern Santa Fe156,690
    1,021C.H. Robinson Worldwide, Inc.56,911
    2,385CSX Corp.113,240
    9,313Caterpillar, Inc.543,786
    784Cintas Corp.22,023
    1,628Cummins, Inc.73,097
    2,135Danaher Corp.151,414
    3,448Deere & Co.184,503
    1,250Donnelley (R.R.) & Sons Co.25,725
    314Dun & Bradstreet Corp.24,677
    1,343Eaton Corp.85,818
    6,175Emerson Electric Co.255,707
    5,468FedEx Corp.461,773
    7,399Fluor Corp.314,310
    3,175General Dynamics Corp.209,233
    115,521General Electric Co.1,850,646
    6,197Honeywell International, Inc.238,399
    1,504ITT Corp.77,787
    3,172Illinois Tool Works, Inc.154,286
    1,0951Iron Mountain, Inc.26,280
    2,674Lockheed Martin Corp.206,513
    15,283Norfolk Southern Corp.785,546
    2,619Northrop Grumman Corp.143,521
    3,011PACCAR, Inc.111,648
    1,280Pitney Bowes, Inc.29,491
    1,165Precision Castparts Corp.120,787
    15,253Raytheon Co.785,987
    1,962Republic Services, Inc.55,328
    920Robert Half International, Inc.20,544
    5241Stericycle, Inc.28,679
    13,535Tyco International Ltd.485,500
    3,111Union Pacific Corp.196,802
    6,075United Parcel Service, Inc.349,130
    16,064United Technologies Corp.1,080,143
    Annual Shareholder Report
    17

    Shares or
    Principal
    Amount
    Value in
    U.S. Dollars
    2,941Waste Management, Inc.96,582
    TOTAL10,575,623
    Information Technology – 8.2%
    6,1551Adobe Systems, Inc.215,917
    6,041Altera Corp.127,042
    5,949Analog Devices, Inc.178,411
    5,9471Apple, Inc.1,188,865
    27,230Applied Materials, Inc.335,201
    5,798Automatic Data Processing, Inc.251,923
    26,1751Broadcom Corp.764,310
    4,681CA, Inc.103,450
    49,1341Cisco Systems, Inc.1,149,736
    3,4161Cognizant Technology Solutions Corp.150,065
    7,967Corning, Inc.132,890
    8,8051Dell, Inc.124,327
    18,1181EMC Corp. Mass304,926
    13,0521eBay, Inc.319,383
    4,0331Google Inc.2,351,239
    24,517Hewlett-Packard Co.1,202,804
    129,232Intel Corp.2,481,254
    12,049International Business Machines Corp.1,522,391
    3,7821Intuit, Inc.110,472
    4,558Linear Technology Corp.122,929
    1,109Mastercard, Inc. Class A267,114
    3,8001McAfee, Inc.144,970
    17,9451Micron Technology, Inc.134,946
    108,904Microsoft Corp.3,202,867
    11,158Motorola, Inc.89,376
    11,1681NVIDIA Corp.145,854
    45,828Oracle Corp.1,011,882
    3,764Paychex, Inc.118,001
    17,596Qualcomm, Inc.791,820
    9,6341Symantec Corp.171,004
    25,970Texas Instruments, Inc.656,781
    8,044Western Union Co.148,412
    5,702Xilinx, Inc.129,093
    Annual Shareholder Report
    18

    Shares or
    Principal
    Amount
    Value in
    U.S. Dollars
    14,0551Yahoo, Inc.210,403
    TOTAL20,360,058
    Materials – 3.3%
    4,309Air Products & Chemicals, Inc.357,345
    20,182Alcoa, Inc.252,679
    2,654BHP Billiton LTD — SPON ADR199,846
    1,972Ball Corp.97,437
    13,802Barrick Gold Corp.589,207
    23,460Dow Chemical Co.651,719
    18,549Du Pont (E.I.) de Nemours & Co.641,425
    4,922Ecolab, Inc.221,047
    8,425Freeport-McMoRan Copper & Gold, Inc.697,590
    8,902International Paper Co.226,556
    11,185Monsanto Co.903,189
    10,187Newmont Mining Corp.546,431
    6,693Nucor Corp.283,850
    3,5671Owens-Illinois, Inc.111,540
    3,366PPG Industries, Inc.200,041
    3,600Potash Corp. of Saskatchewan, Inc.404,712
    13,039Praxair, Inc.1,069,589
    2,491Sigma-Aldrich Corp.132,870
    6,382United States Steel Corp.285,020
    2,552Vulcan Materials Co.123,721
    4,365Weyerhaeuser Co.169,973
    TOTAL8,165,787
    Utilities – 2.0%
    9,1811AES Corp.116,966
    3,276Ameren Corp.85,143
    6,582American Electric Power Co., Inc.211,875
    3,754Consolidated Edison Co.161,084
    2,714Constellation Energy Group86,359
    2,287DTE Energy Co.91,732
    8,137Dominion Resources, Inc.296,024
    17,986Duke Energy Corp.300,006
    1,819EQT Corp.74,852
    4,492Edison International152,953
    2,695Entergy Corp.211,962
    Annual Shareholder Report
    19

    Shares or
    Principal
    Amount
    Value in
    U.S. Dollars
    9,230Exelon Corp.444,701
    5,702FPL Group, Inc.296,333
    4,303FirstEnergy Corp.185,373
    5,081P G & E Corp.215,130
    5,217PPL Corp.159,223
    12,016Progress Energy, Inc.469,705
    7,066Public Service Enterprises Group, Inc.221,590
    2,411Questar Corp.95,644
    3,518Sempra Energy186,947
    23,859Southern Co.765,635
    6,340Xcel Energy, Inc.128,829
    TOTAL4,958,066
    TOTAL COMMON STOCKS
    (IDENTIFIED COST $82,604,297)
    93,550,099
    Asset-Backed Securities – 0.9%
    $19,0752,3125 Home Loan Owner Trust 1998-1A B1, 9.76%, 2/15/202915,832
    250,000Banc of America Commercial Mortgage, Inc. 2007-4 A4, 5.935%, 2/10/2051212,926
    800,000Citigroup/Deutsche Bank Commercial Mortgage 2007-CD5, Series 2007-CD5, 5.886%, 11/15/2044685,544
    350,000LB-UBS Commercial Mortgage Trust 2008-C1 A2, 6.318%, 4/15/2041330,831
    100,000Merrill Lynch Mortgage Trust 2008-C1 AM, 6.461%, 2/12/205170,311
    400,000Merrill Lynch/Countrywide Commercial Mortgage 2007-6, Series 2007-6, 5.485%, 03/12/2051331,479
    315,000Morgan Stanley Capital I 2006-IQ12 A4, 5.332%, 12/15/2043302,060
    250,000Morgan Stanley Capital, Inc. A4, 6.076%, 6/11/2049209,319
    TOTAL ASSET-BACKED SECURITIES
    (IDENTIFIED COST $2,441,592)
    2,158,302
    Collateralized Mortgage Obligations – 0.3%
    800,000Citigroup/Deutsche Bank Commercial Mortgage 2007-CD4 A3, 5.293%, 12/11/2049757,438
    5,7432,3SMFC Trust Asset-Backed Certificates, 1997-A B1-4, 7.719%, 1/28/20273,446
    TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
    (IDENTIFIED COST $816,269)
    760,884
    Corporate Bonds – 6.9%
    Basic Industry@0018Chemicals – 0.1%
    95,000Dow Chemical Co., Note, 8.550%, 05/15/2019112,540
    40,000Du Pont (E.I.) de Nemours & Co., 5.000%, 01/15/201343,595
    Annual Shareholder Report
    20

    Shares or
    Principal
    Amount
    Value in
    U.S. Dollars
    $100,000Praxair, Inc., 4.625%, 03/30/2015109,661
    35,000Rohm & Haas Co., 6.000%, 09/15/201736,472
    TOTAL302,268
    Basic Industry@0018Metals & Mining – 0.3%
    80,000Alcan, Inc., 5.000%, 06/01/201583,583
    70,000Alcoa, Inc., Note, 5.550%, 02/01/201770,434
    90,000Allegheny Technologies, Inc., Sr. Note, 9.375%, 06/01/2019103,800
    10,000BHP Finance (USA), Inc., 6.500%, 04/01/201911,761
    200,000Barrick Gold Corp., 6.950%, 04/01/2019234,034
    120,000Newmont Mining Corp., Company Guarantee, 5.875%, 04/01/2035114,233
    120,000Rio Tinto Finance USA Ltd., 5.875%, 07/15/2013130,631
    100,0002,3Xstrata Finance Canada Ltd., Unsecd. Note, 5.500%, 11/16/2011104,629
    TOTAL853,105
    Basic Industry@0018Paper – 0.1%
    30,000International Paper Co., Sr. Unsecd. Note, 7.500%, 08/15/202133,607
    20,000Louisiana-Pacific Corp., 8.875%, 08/15/201020,500
    150,000Pope & Talbot, Inc., 8.375%, 6/1/20131,388
    100,000Weyerhaeuser Co., Deb., 7.375%, 03/15/203291,524
    TOTAL147,019
    Capital Goods@0018Aerospace & Defense – 0.1%
    50,0002,3BAE Systems Holdings, Inc., 5.200%, 08/15/201554,129
    100,000Boeing Co., 4.875%, 02/15/2020104,249
    25,000Lockheed Martin Corp., Sr. Note, 4.121%, 03/14/201326,583
    TOTAL184,961
    Capital Goods@0018Building Materials – 0.0%
    50,000RPM International, Inc., 6.500%, 02/15/201851,873
    40,000RPM International, Inc., Sr. Unsecd. Note, 6.125%, 10/15/201940,917
    TOTAL92,790
    Capital Goods@0018Diversified Manufacturing – 0.2%
    20,000Dover Corp., Note, 5.450%, 03/15/201821,944
    70,000Emerson Electric Co., 4.875%, 10/15/201974,517
    68,0002,3Hutchison Whampoa International Ltd., 6.500%, 02/13/201375,145
    100,000Roper Industries, Inc., Sr. Unsecd. Note, 6.250%, 09/01/2019107,109
    90,0002,3Textron Financial Corp., Jr. Sub. Note, 6.000%, 02/15/206763,450
    50,000Thomas & Betts Corp., Note, 7.250%, 06/01/201351,211
    TOTAL393,376
    Annual Shareholder Report
    21

    Shares or
    Principal
    Amount
    Value in
    U.S. Dollars
    Capital Goods@0018Environmental – 0.1%
    $110,0002,3Republic Services, Inc., Sr. Unsecd. Note, Series 144A, 5.500%, 09/15/2019115,496
    25,000Waste Management, Inc., 7.375%, 03/11/201929,255
    TOTAL144,751
    Capital Goods@0018Packaging – 0.0%
    40,000Pactiv Corp., 6.400%, 01/15/201842,324
    Communications@0018Media & Cable – 0.2%
    27,000Comcast Cable Communications Holdings, Company Guarantee, 8.375%, 03/15/201331,678
    100,000Comcast Corp., 7.050%, 03/15/2033110,284
    100,000Comcast Corp., Company Guarantee, 6.500%, 01/15/2017111,995
    120,000Time Warner Cable, Inc., Company Guarantee, 6.750%, 06/15/2039127,863
    20,000Time Warner Cable, Inc., Company Guarantee, 8.250%, 04/01/201924,456
    50,000Time Warner Cable, Inc., Company Guarantee, 8.750%, 02/14/201962,492
    50,000Time Warner Cable, Inc., Sr. Unsecd. Note, 5.850%, 05/01/201753,530
    TOTAL522,298
    Communications@0018Media Noncable – 0.1%
    120,000News America Holdings, Inc., Sr. Deb., 9.250%, 02/01/2013142,238
    90,0002,3News America, Inc., 5.650%, 08/15/202095,528
    TOTAL237,766
    Communications@0018Telecom Wireless – 0.2%
    130,000AT&T Wireless Services, Inc., 8.750%, 03/01/2031172,447
    90,000America Movil S.A.B. de C.V., Note, 5.750%, 01/15/201597,058
    20,000Vodafone Group PLC, 5.350%, 02/27/201221,569
    90,000Vodafone Group PLC, Note, 5.625%, 02/27/201798,781
    TOTAL389,855
    Communications@0018Telecom Wirelines – 0.2%
    15,000CenturyTel, Inc., Sr. Note, 6.150%, 09/15/201915,480
    150,000Deutsche Telekom International Finance BV, 4.875%, 07/08/2014160,810
    45,000France Telecom SA, Sr. Unsecd. Note, 5.375%, 07/08/201949,262
    100,000Telefonica SA, Sr. Note, 5.855%, 02/04/2013110,536
    40,000Verizon Communications, Inc., 6.100%, 04/15/201844,419
    50,000Verizon Communications, Inc., Sr. Unsecd. Note, 6.350%, 04/01/201956,387
    TOTAL436,894
    Consumer Cyclical@0018Automotive – 0.0%
    70,000DaimlerChrysler North America Holding Corp., 6.500%, 11/15/201376,954
    Annual Shareholder Report
    22

    Shares or
    Principal
    Amount
    Value in
    U.S. Dollars
    Consumer Cyclical@0018Entertainment – 0.2%
    $80,000International Speedway Corp., 5.400%, 04/15/201484,030
    280,000Time Warner, Inc., Company Guarantee, 6.875%, 05/01/2012310,443
    TOTAL394,473
    Consumer Cyclical@0018Lodging – 0.0%
    50,000Wyndham Worldwide Corp., Sr. Unsecd. Note, 6.000%, 12/01/201646,652
    Consumer Cyclical@0018Retailers – 0.2%
    187,2742,3CVS Caremark Corp., Pass Thru Cert., 5.298%, 01/11/2027180,772
    60,000Costco Wholesale Corp., 5.300%, 03/15/201265,318
    20,000JC Penney Corp., Inc., Sr. Unsecd. Note, 5.750%, 02/15/201819,000
    70,000Target Corp., Note, 5.875%, 07/15/201678,367
    40,000Wal-Mart Stores, Inc., 6.200%, 04/15/203845,474
    TOTAL388,931
    Consumer Non-Cyclical@0018Food/Beverage – 0.3%
    90,0002,3Bacardi Ltd., Sr. Note, 7.450%, 04/01/2014103,840
    70,000Bottling Group LLC, Note, 5.500%, 04/01/201678,462
    30,000Coca-Cola Enterprises, Inc., 4.250%, 03/01/201532,221
    80,000Diageo Capital PLC, Company Guarantee, 7.375%, 01/15/201494,355
    60,000General Mills, Inc., Note, 5.700%, 02/15/201766,756
    125,000Kraft Foods, Inc., Note, 5.250%, 10/01/2013134,989
    100,000Kraft Foods, Inc., Sr. Unsecd. Note, 6.125%, 02/01/2018108,056
    50,000PepsiCo, Inc., 4.650%, 02/15/201354,311
    30,0002,3Ralcorp Holdings, Inc., Sr. Note, 6.625%, 8/15/203931,113
    15,000Sysco Corp., Sr. Note, 5.375%, 03/17/201916,644
    TOTAL720,747
    Consumer Non-Cyclical@0018Health Care – 0.0%
    20,000Express Scripts, Inc., Sr. Unsecd. Note, 7.25%, 6/15/201923,606
    75,000Quest Diagnostics, Inc., Sr. Unsecd. Note, 6.400%, 07/01/201782,540
    TOTAL106,146
    Consumer Non-Cyclical@0018Pharmaceuticals – 0.1%
    40,000Abbott Laboratories, 5.150%, 11/30/201244,555
    100,000Genentech, Inc., Note, 4.750%, 07/15/2015110,407
    80,000Pfizer, Inc., Sr. Unsecd. Note, 6.200%, 03/15/201992,300
    TOTAL247,262
    Consumer Non-Cyclical@0018Products – 0.0%
    45,000Philips Electronics NV, 5.750%, 03/11/201849,500
    Consumer Non-Cyclical@0018Supermarkets – 0.0%
    25,000Kroger Co., Bond, 6.900%, 04/15/203829,611
    Annual Shareholder Report
    23

    Shares or
    Principal
    Amount
    Value in
    U.S. Dollars
    Consumer Non-Cyclical@0018Tobacco – 0.0%
    $70,000Altria Group, Inc., 9.250%, 08/06/201985,621
    Energy@0018Independent – 0.1%
    120,000Canadian Natural Resources Ltd., 4.900%, 12/01/2014128,889
    30,000EOG Resources, Inc., Note, 5.625%, 06/01/201933,510
    25,000Pemex Project Funding Master, 5.750%, 12/15/201526,117
    80,0002,3Petroleos Mexicanos, 4.875%, 03/15/201581,164
    20,000XTO Energy, Inc., 6.750%, 08/01/203722,562
    25,000XTO Energy, Inc., Sr. Unsecd. Note, 6.250%, 08/01/201727,872
    TOTAL320,114
    Energy@0018Integrated – 0.1%
    60,000Conoco, Inc., Sr. Note, 6.950%, 04/15/202970,613
    100,000ConocoPhillips Australia Funding Co., 5.500%, 04/15/2013110,391
    35,000Petro-Canada, Deb., 7.000%, 11/15/202838,262
    33,3402,3Qatar Petroleum, 5.579%, 05/30/201134,423
    100,0002,3StatoilHydro ASA, 5.125%, 4/30/2014110,817
    TOTAL364,506
    Energy@0018Oil Field Services – 0.0%
    50,000Noble Drilling Corp., Sr. Note, 7.5%, 3/15/201956,222
    25,000Weatherford International Ltd., 6.000%, 03/15/201826,154
    20,000Weatherford International Ltd., 7.000%, 03/15/203821,127
    TOTAL103,503
    Energy@0018Refining – 0.1%
    110,000Premcor Refining Group, Inc., 6.125%, 05/01/2011116,219
    25,000Valero Energy Corp., 9.375%, 03/15/201930,141
    TOTAL146,360
    Financial Institution@0018Banking – 1.0%
    50,000Bank of America Corp., Sr. Note, 5.375%, 06/15/201452,771
    120,000Bank of America Corp., Sr. Note, 7.375%, 5/15/2014135,026
    100,0002,3Barclays Bank PLC, 5.926%, 12/31/204972,500
    70,000Capital One Financial Corp., Sr. Note, 7.375%, 05/23/201480,615
    80,000Citigroup, Inc., Note, 5.125%, 05/05/201481,493
    60,0002,3Commonwealth Bank of Australia, Sr. Unsecd. Note, Series 144A, 3.750%, 10/15/201461,534
    200,000First Union Institutional, Bond, 8.04%, 12/1/2026195,000
    50,000Goldman Sachs Group, Inc., 6.125%, 02/15/203351,838
    150,000Goldman Sachs Group, Inc., Sr. Note, 6.150%, 04/01/2018162,702
    320,000Goldman Sachs Group, Inc., Sr. Unsecd. Note, 5.125%, 01/15/2015340,298
    Annual Shareholder Report
    24

    Shares or
    Principal
    Amount
    Value in
    U.S. Dollars
    $100,000HSBC Finance Capital Trust IX, Note, 5.911%, 11/30/203578,500
    100,000HSBC Finance Corp., 5.000%, 06/30/2015104,785
    75,000Household Finance Corp., Unsecd. Note, 4.75%, 7/15/201378,608
    90,000M & T Bank Corp., 5.375%, 05/24/201294,263
    30,000Merrill Lynch & Co., Inc., Sr. Unsecd. Note, 6.050%, 08/15/201232,388
    100,000Morgan Stanley Group, Inc., 5.300%, 03/01/2013106,804
    100,000Morgan Stanley, Sr. Unsecd. Note, 6.625%, 04/01/2018109,185
    30,000Northern Trust Corp., 4.625%, 05/01/201432,756
    15,000PNC Funding Corp., Sub. Note, 5.625%, 02/01/201715,241
    472,6502,3Regional Diversified Funding, 9.250%, 03/15/2030254,309
    20,000State Street Corp., Sr. Note, 4.300%, 05/30/201421,313
    100,000U.S. Bank, N.A., 6.300%, 02/04/2014113,490
    140,000Wachovia Corp., 5.750%, 02/01/2018147,946
    40,000Wilmington Trust Corp., Sub. Note, 8.500%, 04/02/201839,886
    TOTAL2,463,251
    Financial Institution@0018Brokerage – 0.3%
    220,000Blackrock, Inc., 6.250%, 09/15/2017243,718
    50,000Charles Schwab Corp., Sr. Unsecd. Note, 4.950%, 06/01/201454,232
    40,000Eaton Vance Corp., 6.500%, 10/02/201743,214
    100,0002,3FMR LLC, 4.75%, 3/01/2013101,889
    25,000Janus Capital Group, Inc., Sr. Note, 6.500%, 06/15/201225,284
    30,000Janus Capital Group, Inc., Sr. Note, 6.950%, 06/15/201728,936
    95,000Jefferies Group, Inc., Sr. Unsecd. Note, 8.500%, 07/15/2019104,481
    60,000Lehman Brothers Holdings, Note, 4.8%, 3/13/201412,000
    30,000Nuveen Investments, 5.500%, 09/15/201520,700
    30,000Nuveen Investments, 5%, 9/15/201029,737
    75,000Raymond James Financial, Inc., 8.600%, 08/15/201983,381
    TOTAL747,572
    Financial Institution@0018Finance Noncaptive – 0.5%
    160,000American Express Co., Sr. Unsecd. Note, 8.125%, 05/20/2019192,674
    60,000American Express Credit Corp., Sr. Unsecd. Note, 5.125%, 08/25/201463,869
    100,000American International Group, Inc., Sr. Note, 4.700%, 10/01/201099,062
    120,000Berkshire Hathaway, Inc., Company Guarantee, 5.000%, 08/15/2013131,625
    120,000Capital One Capital IV, 6.745%, 02/17/203795,400
    20,000Capital One Capital V, 10.250%, 08/15/203922,055
    510,000General Electric Capital Corp., 5.625%, 05/01/2018531,737
    30,000General Electric Capital Corp., Note, Series MTN, 6.750%, 03/15/203231,377
    Annual Shareholder Report
    25

    Shares or
    Principal
    Amount
    Value in
    U.S. Dollars
    $80,000International Lease Finance Corp., 4.875%, 09/01/201077,650
    30,0002,3Macquarie Group Ltd., Note, Series 144A, 7.625%, 8/13/201932,863
    TOTAL1,278,312
    Financial Institution@0018Insurance@0018Health – 0.1%
    50,000CIGNA Corp., 6.350%, 03/15/201850,882
    50,000UnitedHealth Group, Inc., Bond, 6.000%, 02/15/201853,314
    50,000Wellpoint, Inc., 5.850%, 01/15/203648,994
    TOTAL153,190
    Financial Institution@0018Insurance@0018Life – 0.6%
    100,000AXA-UAP, Sub. Note, 8.600%, 12/15/2030116,609
    100,0002,3Massachusetts Mutual Life Insurance Co., Sub. Note, 8.875%, 06/01/2039123,886
    90,000MetLife, Inc., 6.750%, 06/01/2016103,442
    10,000MetLife, Inc., Jr. Sub. Note, 10.750%, 08/01/206912,183
    80,0002,3New York Life Insurance Co., Sub. Note, 6.750%, 11/15/203980,979
    300,0002,3Pacific LifeCorp., Bond, 6.600%, 09/15/2033255,635
    50,000Prudential Financial, Inc., 5.150%, 01/15/201352,992
    40,000Prudential Financial, Inc., 6.625%, 12/01/203741,409
    10,000Prudential Financial, Inc., Sr. Note, 7.375%, 06/15/201911,380
    100,000Prudential Financial, Inc., Sr. Unsecd. Note, 4.750%, 09/17/2015102,366
    750,0002Union Central Life Ins Co, Note, 8.2%, 11/1/2026704,991
    TOTAL1,605,872
    Financial Institution@0018Insurance@0018P&C – 0.2%
    80,000ACE INA Holdings, Inc., Sr. Note, 5.700%, 02/15/201787,365
    80,000CNA Financial Corp., 6.500%, 08/15/201679,590
    15,000Chubb Corp., Sr. Note, 5.750%, 05/15/201816,661
    50,000Horace Mann Educators Corp., Sr. Note, 6.850%, 04/15/201650,302
    100,0002,3Liberty Mutual Group, Inc., Unsecd. Note, 5.750%, 03/15/2014101,028
    30,0002,3Nationwide Mutual Insurance Co., Note, Series 144A, 9.375%, 08/15/203931,367
    10,000The Travelers Cos., Inc., Sr. Unsecd. Note, 5.500%, 12/01/201511,198
    TOTAL377,511
    Financial Institution@0018REITs – 0.2%
    45,000Avalonbay Communities, Inc., Sr. Unsecd. Note, Series MTN, 5.700%, 03/15/201747,139
    75,000Boston Properties LP, Sr. Unsecd. Note, 5.875%, 10/15/201977,151
    40,000Equity One, Inc., Bond, 6.000%, 09/15/201736,966
    40,000Liberty Property LP, 6.625%, 10/01/201740,588
    Annual Shareholder Report
    26

    Shares or
    Principal
    Amount
    Value in
    U.S. Dollars
    $120,000Prologis, Sr. Note, 5.500%, 04/01/2012122,546
    20,000Prologis, Sr. Note, 7.625%, 8/15/201421,473
    40,000Simon Property Group LP, 6.750%, 05/15/201443,938
    50,000Simon Property Group, Inc., 6.350%, 08/28/201254,065
    TOTAL443,866
    Foreign-Local-Government – 0.0%
    50,000Quebec, Province of, Note, Series MTNA, 7.035%, 3/10/202661,788
    Municipal Services – 0.1%
    140,0002,3Army Hawaii Family Housing , 5.524%, 6/15/2050100,631
    100,0002,3Camp Pendleton & Quantico Housing LLC, 5.572%, 10/01/205072,232
    TOTAL172,863
    Technology – 0.3%
    20,000Cisco Systems, Inc., Sr. Unsecd. Note, 5.500%, 02/22/201622,532
    40,000Dell Computer Corp., Deb., 7.100%, 04/15/202844,692
    60,000Dun & Bradstreet Corp., Sr. Unsecd. Note, 5.500%, 03/15/201162,732
    105,000Fiserv, Inc., Sr. Note, 6.800%, 11/20/2017118,664
    50,000Harris Corp., 5.950%, 12/01/201754,286
    60,000Hewlett-Packard Co., Note, 5.400%, 03/01/201766,422
    200,000IBM Corp., Sr. Note, 5.700%, 09/14/2017224,896
    100,000Oracle Corp., Sr. Unsecd. Note, Series WI, 5.000%, 01/15/2011104,909
    TOTAL699,133
    Transportation@0018Railroads – 0.1%
    100,000Burlington Northern Santa Fe Corp., 4.875%, 01/15/2015107,436
    50,000Union Pacific Corp., 4.875%, 01/15/201553,355
    45,000Union Pacific Corp., Bond, 6.625%, 2/01/202950,906
    TOTAL211,697
    Transportation@0018Services – 0.0%
    75,0002,3Enterprise Rent-A-Car USA Finance Co., 6.375%, 10/15/201778,488
    Utility@0018Electric – 0.5%
    60,000Appalachian Power Co., Sr. Unsecd. Note, 7.950%, 01/15/202074,669
    50,000Cleveland Electric Illuminating Co., Sr. Unsecd. Note, 5.950%, 12/15/203648,355
    50,000Commonwealth Edison Co., 1st Mtg. Bond, 5.800%, 03/15/201854,814
    40,000Consolidated Edison Co., Sr. Unsecd. Note, 5.500%, 09/15/201643,238
    10,000Consolidated Edison Co., Sr. Unsecd. Note, 6.650%, 04/01/201911,783
    60,0002,3Electricite De France, 5.500%, 01/26/201466,861
    Annual Shareholder Report
    27

    Shares or
    Principal
    Amount
    Value in
    U.S. Dollars
    $50,0002,3FirstEnergy Solutions Corp., Company Guarantee, Series 144A, 6.050%, 08/15/202152,773
    90,0002,3FirstEnergy Solutions Corp., Series 144A, 4.800%, 02/15/201595,147
    83,2702,3Great River Energy, 1st Mtg. Note, 5.829%, 07/01/201790,138
    120,000MidAmerican Energy Co., 4.650%, 10/01/2014129,494
    100,000National Rural Utilities Cooperative Finance Corp., Sr. Unsecd. Note, 10.375%, 11/01/2018136,045
    30,000Northern States Power Co., MN, 1st Mtg. Bond, 5.250%, 03/01/201832,699
    60,000PPL Energy Supply LLC, Sr. Unsecd. Note, 6.000%, 12/15/203658,037
    40,000Progress Energy, Inc., 7.050%, 03/15/201946,654
    100,000Union Electric Co., 6.000%, 04/01/2018109,162
    120,000Virginia Electric & Power Co., Sr. Unsecd. Note, 5.000%, 06/30/2019127,057
    80,000Virginia Electric & Power Co., Sr. Unsecd. Note, 5.100%, 11/30/201287,639
    TOTAL1,264,565
    Utility@0018Natural Gas Distributor – 0.1%
    120,000Atmos Energy Corp., 5.125%, 01/15/2013129,109
    15,000Atmos Energy Corp., 8.500%, 03/15/201918,989
    60,000Sempra Energy, Sr. Unsecd. Note, 6.500%, 06/01/201666,922
    TOTAL215,020
    Utility@0018Natural Gas Pipelines – 0.2%
    100,000Duke Capital Corp., Sr. Note, 6.250%, 02/15/2013109,493
    70,000Enbridge, Inc., Sr. Note, 5.600%, 04/01/201776,332
    110,000Enterprise Products Operating LLC, Company Guarantee, 9.750%, 01/31/2014134,117
    100,000Kinder Morgan Energy Partners LP, Sr. Unsecd. Note, 5.800%, 03/15/203594,305
    TOTAL414,247
    TOTAL CORPORATE BONDS
    (IDENTIFIED COST $16,693,653)
    17,015,162
    Government AgencY – 1.1%
    2,550,000Federal Home Loan Mortgage Corp., 4.625%, 10/25/2012
    (IDENTIFIED COST $2,551,026)
    2,793,165
    Governments/Agencies – 0.1%
    Sovereign – 0.1%
    75,000United Mexican States, 6.625%, 03/03/201585,087
    30,000United Mexican States, Series MTNA, 6.750%, 09/27/203434,055
    TOTAL GOVERNMENTS/AGENCIES
    (IDENTIFIED COST $106,742)
    119,142
    Annual Shareholder Report
    28

    Shares or
    Principal
    Amount
    Value in
    U.S. Dollars
    Mortgage-Backed Securities – 0.4%
    $9,271Federal Home Loan Mortgage Corp. Pool C00592, 7.000%, 3/1/202810,239
    7,288Federal Home Loan Mortgage Corp. Pool C00896, 7.500%, 12/1/20298,064
    20,431Federal Home Loan Mortgage Corp. Pool C17281, 6.500%, 11/1/202822,286
    16,502Federal Home Loan Mortgage Corp. Pool C19588, 6.500%, 12/1/202818,001
    5,563Federal Home Loan Mortgage Corp. Pool C25621, 6.500%, 5/1/20296,068
    24,878Federal Home Loan Mortgage Corp. Pool C76361, 6.000%, 2/1/203326,954
    68,163Federal Home Loan Mortgage Corp. Pool E01545, 5.000%,
    15 Year, 1/1/2019
    73,055
    5,665Federal Home Loan Mortgage Corp. Pool E20252, 7.000%,
    15 Year, 7/1/2011
    5,874
    1,346Federal Home Loan Mortgage Corp. Pool E77591, 6.500%, 7/1/20141,443
    18,506Federal Home Loan Mortgage Corp. Pool E99510, 5.500%, 9/1/201820,002
    20,564Federal Home Loan Mortgage Corp. Pool G01444, 6.500%, 8/1/203222,419
    13,204Federal National Mortgage Association Pool 251697, 6.500%,
    30 Year, 5/1/2028
    14,416
    32,606Federal National Mortgage Association Pool 252334, 6.500%,
    30 Year, 2/1/2029
    35,497
    75,582Federal National Mortgage Association Pool 254720, 4.500%, 5/1/201880,217
    74,557Federal National Mortgage Association Pool 254802, 4.500%, 7/1/201879,129
    35,189Federal National Mortgage Association Pool 254905, 6.000%, 10/1/203338,067
    70,222Federal National Mortgage Association Pool 255075, 5.500%, 2/1/202475,155
    80,030Federal National Mortgage Association Pool 255079, 5.000%, 2/1/201985,724
    3,420Federal National Mortgage Association Pool 303168, 9.500%,
    30 Year, 2/1/2025
    4,031
    1,862Federal National Mortgage Association Pool 323159, 7.500%, 4/1/20282,062
    14,759Federal National Mortgage Association Pool 323640, 7.500%, 4/1/202916,348
    651Federal National Mortgage Association Pool 323970, 7.000%,
    15 Year, 10/1/2014
    698
    27,133Federal National Mortgage Association Pool 428865, 7.000%, 6/1/202830,065
    2,912Federal National Mortgage Association Pool 443215, 6.000%, 10/1/20283,161
    1,531Federal National Mortgage Association Pool 511365, 7.000%, 8/1/20291,696
    284Federal National Mortgage Association Pool 514184, 7.500%, 9/1/2029315
    Annual Shareholder Report
    29

    Shares or
    Principal
    Amount
    Value in
    U.S. Dollars
    $67,158Federal National Mortgage Association Pool 545993, 6.000%, 11/1/203272,736
    26,995Federal National Mortgage Association Pool 555272, 6.000%, 3/1/203329,237
    62,012Federal National Mortgage Association Pool 713974, 5.500%, 7/1/203366,268
    81,626Federal National Mortgage Association Pool 721502, 5.000%, 7/1/203385,975
    1,480Government National Mortgage Association Pool 352214, 7.000%, 4/15/20231,621
    6,131Government National Mortgage Association Pool 451522, 7.500%,
    30 Year, 10/15/2027
    6,767
    13,594Government National Mortgage Association Pool 462556, 6.500%, 2/15/202814,809
    487Government National Mortgage Association Pool 462739, 7.500%, 5/15/2028538
    705Government National Mortgage Association Pool 464835, 6.500%, 9/15/2028767
    10,787Government National Mortgage Association Pool 469699, 7.000%, 11/15/202811,876
    12,404Government National Mortgage Association Pool 486760, 6.500%, 12/15/202813,515
    2,372Government National Mortgage Association Pool 780339, 8.000%,
    30 Year, 12/15/2023
    2,628
    15,018Government National Mortgage Association Pool 780453, 7.500%,
    30 Year, 12/15/2025
    16,564
    14,325Government National Mortgage Association Pool 780584, 7.000%,
    30 Year, 6/15/2027
    15,794
    TOTAL MORTGAGE-BACKED SECURITIES
    (IDENTIFIED COST $958,314)
    1,020,081
    Municipal – 0.0%
    Illinois – 0.0%
    90,000Chicago, IL Metropolitan Water Reclamation District, Direct Payment Taxable Limited GO Build America Bonds, 5.720%, 12/01/2038 (IDENTIFIED COST $90,000)95,291
    U.S. Treasury – 4.7%
    425,0004,5United States Treasury Bill, 0.06%, 12/10/2009424,994
    3,250,0004,5United States Treasury Bill, 0.06%, 2/4/20103,249,912
    400,0004,5United States Treasury Bill, 0.065%, 2/18/2010399,987
    3,700,0004,5United States Treasury Bill, 0.08%, 1/21/20103,699,974
    1,600,0004,5United States Treasury Bill, 0.115%, 12/31/20091,599,908
    1,830,0004,5United States Treasury Bill, 0.15%, 12/3/20091,829,992
    500,000United States Treasury Bond, 3.500%, 2/15/2039441,484
    Annual Shareholder Report
    30

    Shares or
    Principal
    Amount
    Value in
    U.S. Dollars
    $100,000United States Treasury Note, 3.125%, 8/31/2013106,219
    TOTAL U.S. TREASURY
    (IDENTIFIED COST $11,787,748)
    11,752,470
    Exchange-Traded Funds – 23.2%
    22,326iShares MSCI Brazil Index Fund1,711,735
    14,990iShares MSCI Canada Index Fund388,691
    68,178iShares MSCI EAFE Index Fund3,778,425
    116,535iShares MSCI Emerging Market Index Fund4,721,998
    36,0471iShares MSCI South Korea Index Fund1,599,766
    391,6521iShares Russell 1000 Index Fund23,589,200
    345,811iShares Russell 2000 Index Fund20,091,619
    22,2081SPDR S&P China ETF1,609,192
    TOTAL EXCHANGE-TRADED FUNDS
    (IDENTIFIED COST $50,235,289)
    57,490,626
    Mutual Funds – 25.0%;6
    199,106Emerging Markets Fixed Income Core Fund4,786,699
    946,934Federated Mortgage Core Portfolio9,677,667
    1,867,382High Yield Bond Portfolio11,484,402
    36,095,0227Prime Value Obligations Fund, Institutional Shares, 0.22%36,095,022
    TOTAL MUTUAL FUNDS
    (IDENTIFIED COST $59,546,221)
    62,043,790
    TOTAL INVESTMENTS — 100.3%
    (IDENTIFIED COST $227,831,151)8
    248,799,012
    OTHER ASSETS AND LIABILITIES - NET — (0.3)%9(643,382)
    TOTAL NET ASSETS — 100%$248,155,630
    Annual Shareholder Report
    31

    • At November 30, 2009, the Fund had the following outstanding futures contracts:
    DescriptionNumber of
    Contracts
    Notional
    Value
    Expiration
    Date
    Unrealized
    Appreciation/
    (Depreciation)
    1ASX SPI 200 Index Short Futures108$12,676,500December 2009$(301,812)
    1OMX 30 Index Short Futures640$60,080,000December 2009$296,519
    1SGX MSCI Singapore Index Short Futures191$12,560,160December 2009$230,987
    1Swiss Market Index Short Futures306$19,112,760December 2009$85,303
    1Topix Index Short Futures40$336,000,000December 2009$173,774
    1United States Treasury Bonds 30-Year Short Futures18$2,208,938March 2010$(45,316)
    1United States Treasury Notes 2-Year Short Futures30$6,536,719March 2010$(17,877)
    1United States Treasury Notes 5-Year Short Futures40$4,690,625March 2010$(42,274)
    1AEX Index Long Futures45$2,751,300December 2009$(213,689)
    1CAC 40 Index Long Futures320$11,758,400December 2009$(863,068)
    1DAX Index Long Futures64$9,018,400December 2009$415,652
    1FTSE 100 Index Long Futures320$16,628,800December 2009$1,003,042
    1FTSE/MIB Index Long Futures35$3,841,600December 2009$(93,678)
    1Hang Seng Index Long Futures105$114,177,000December 2009$(646,796)
    1IBEX 35 Index Long Futures45$5,252,850December 2009$(199,567)
    1MSCI E-Mini EAFE Index Long Futures19$1,483,900December 2009$(8,559)
    1Russell 2000 Mini Index Long Futures10$579,200December 2009$(11,483)
    1S & P 500 Index Long Futures33$9,032,100December 2009$611,193
    1S&P/TSE 60 Index Long Futures57$7,746,300December 2009$213,628
    NET UNREALIZED APPRECIATION ON FUTURES CONTRACTS$585,979
    • At November 30, 2009, the Fund had the following open swap contract:
    Credit Default
    Swap Counterparty
    Goldman Sachs & Co.
    Reference EntitySeries 12 Investment Grade Index
    Buy/SellSell
    Pay/Receive Fixed Rate1.00%
    Expiration Date6/20/2014
    Implied Credit Spread at 11/30/2009100.48%
    Notional Amount$9,920,000
    Market Value$(32,854)
    Upfront Premiums Paid/(Received)$(255,787)
    Unrealized Appreciation$222,933
    Annual Shareholder Report
    32

    • At November 30, 2009, the Fund had the following outstanding foreign exchange contracts:
    Settlement DateForeign
    Currency
    Units to
    Deliver/
    Receive
    In
    Exchange
    For
    Unrealized
    Appreciation/
    (Depreciation)
    Contracts Purchased:
    12/2/200912,810,634 Australian Dollar$11,716,606$16,657
    12/2/20097,470,781 Canadian Dollar$7,030,132$48,491
    12/2/2009306,704 Canadian Dollar$290,101$503
    12/2/200932,391,246 Euro$48,247,409$389,702
    12/2/20091,560,492 Euro$2,320,904$22,254
    12/3/2009343,561,484 Japanese Yen$3,983,322$(8,756)
    12/2/200916,471,084 Pound Sterling$27,365,388$(268,818)
    12/2/2009642,290 Pound Sterling$1,079,105$(22,474)
    12/2/200962,169,688 Swedish Krona$8,892,818$24,810
    12/2/200919,575,952 Swiss Francs$19,497,960$(8,735)
    1/6/20107,777,485 Canadian Dollar$7,368,532$628
    1/6/201032,651,737 Euro$48,953,443$69,528
    1/6/201016,624,373 Pound Sterling$27,270,289$72,604
    Contracts Sold:
    12/2/200912,537,084 Australian Dollar$11,385,678$(97,040)
    12/2/2009273,550 Australian Dollar$253,586$3,042
    12/2/20097,777,485 Canadian Dollar$7,368,532$(698)
    12/2/200933,951,738 Euro$50,907,236$(73,034)
    12/2/200917,113,374 Pound Sterling$28,077,912$(75,289)
    12/2/200962,067,825 Swedish Krona$8,870,608$(32,408)
    12/2/2009101,863 Swedish Krona$14,810$198
    12/2/200918,703,600 Swiss Francs$18,402,716$(218,022)
    12/2/2009872,352 Swiss Francs$858,462$(10,025)
    12/3/2009341,599,700 Japanese Yen$3,770,375$(181,517)
    12/3/20091,961,784 Japanese Yen$21,984$(711)
    1/6/201012,602,633 Australian Dollar$11,487,300$(16,201)
    1/6/2010333,800,000 Japanese Yen$3,870,818$8,472
    1/6/201019,110,952 Swiss Francs$19,038,985$7,702
    1/7/201060,037,061 Swedish Krona$8,588,772$(24,141)
    NET UNREALIZED DEPRECIATION ON FOREIGN EXCHANGE CONTRACTS$(373,278)
    • Net Unrealized Appreciation/Depreciation on Futures Contracts, Swap Contract and Foreign Exchange Contracts is included in “Other Assets and Liabilities — Net”.
    Annual Shareholder Report
    33

    • Note: The categories of investments are shown as a percentage of total net assets at November 30, 2009.
    • Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
    • Level 1 — quoted prices in active markets for identical securities
    • Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
    • Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
    • The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
    Annual Shareholder Report
    34

      • The following is a summary of the inputs used, as of November 30, 2009, in valuing the Fund's assets carried at fair value:
      Valuation Inputs
      Level 1 - 
      Quoted
      Prices and
      Investments in
      Mutual Funds*
      Level 2 - 
      Other
      Significant
      Observable
      Inputs
      Level 3 - 
      Significant
      Unobservable
      Inputs
      Total
      Equity Securities:
      Domestic$89,517,516$ — $ — $89,517,516
      International3,506,834525,749 — 4,032,583
      Debt Securities:
      Asset-Backed Securities — 2,158,302 — 2,158,302
      Collateralized Mortgage Obligations — 760,884 — 760,884
      Corporate Bonds — 17,015,162 — 17,015,162
      Government Agencies — 2,793,165 — 2,793,165
      Governments/Agencies — 119,142 — 119,142
      Mortgage-Backed Securities — 1,020,081 — 1,020,081
      Municipal — 95,291 — 95,291
      U.S. Treasury — 11,752,470 — 11,752,470
      Exchange-Traded Funds57,490,626 —  — 57,490,626
      Mutual Funds62,043,790 —  — 62,043,790
      TOTAL SECURITIES$212,558,766$36,240,246$ — $248,799,012
      OTHER FINANCIAL INSTRUMENTS**$460,934$(25,300)$ — $435,634
      *Emerging Markets Fixed Income Core Fund (EMCORE) is an affiliated limited partnership offered only to registered investment companies and other accredited investors. EMCORE invests primarily in emerging markets fixed-income securities.
      **Other financial instruments include futures contracts, swap contracts and foreign exchange contracts.
      • The following acronyms are used throughout this portfolio:
      ADR — American Depositary Receipt
      MTN — Medium Term Note
      REITs — Real Estate Investment Trusts
      • See Notes which are an integral part of the Financial Statements
      Annual Shareholder Report
      35

      Statement of Assets and Liabilities

      November 30, 2009

      Assets:
      Total investments in securities, at value including $62,043,790 of investments in affiliated issuers (Note 5) (identified cost $227,831,151)$248,799,012
      Cash16,036
      Income receivable556,520
      Receivable for investments sold66,560
      Receivable for shares sold206,868
      Receivable for foreign exchange contracts664,591
      Receivable for periodic payments from swap contracts19,565
      Other receivables5,570
      TOTAL ASSETS250,334,722
      Liabilities:
      Payable for investments purchased$80,000
      Payable for shares redeemed463,868
      Payable for foreign exchange contracts1,037,869
      Payable for daily variation margin302,260
      Income distribution payable11,841
      Swaps, at value (premiums received $255,787)32,854
      Payable for investment adviser fee (Note 5)749
      Payable for transfer and dividend disbursing agent fees and expenses77,681
      Payable for Directors'/Trustees' fees2,843
      Payable for distribution services fee (Note 5)48,577
      Payable for shareholder services fee (Note 5)39,794
      Accrued expenses80,756
      TOTAL LIABILITIES2,179,092
      Net assets for 15,864,690 shares outstanding$248,155,630
      Net Assets Consist of:
      Paid-in capital$265,377,267
      Net unrealized appreciation of investments, futures contracts, swap contracts and translation of assets and liabilities in foreign currency21,408,749
      Accumulated net realized loss on investments, futures contracts, swap contracts and foreign currency transactions(38,573,661)
      Distributions in excess of net investment income(56,725)
      TOTAL NET ASSETS$248,155,630
      Annual Shareholder Report
      36

      Statement of Assets and Liabilities — continued
      Net Asset Value, Offering Price and Redemption Proceeds Per Share
      Class A Shares:
      Net asset value per share ($149,696,003 ÷ 9,563,632 shares outstanding), no par value, unlimited shares authorized$15.65
      Offering price per share (100/94.50 of $15.65)$16.56
      Redemption proceeds per share$15.65
      Class B Shares:
      Net asset value per share ($20,150,846 ÷ 1,290,750 shares outstanding), no par value, unlimited shares authorized$15.61
      Offering price per share$15.61
      Redemption proceeds per share (94.50/100 of $15.61)$14.75
      Class C Shares:
      Net asset value per share ($28,278,271 ÷ 1,818,411 shares outstanding), no par value, unlimited shares authorized$15.55
      Offering price per share$15.55
      Redemption proceeds per share (99.00/100 of $15.55)$15.39
      Class K Shares:
      Net asset value per share ($47,254,069 ÷ 3,014,519 shares outstanding), no par value, unlimited shares authorized$15.68
      Offering price per share$15.68
      Redemption proceeds per share$15.68
      Institutional Shares:
      Net asset value per share ($2,776,441 ÷ 177,378 shares outstanding), no par value, unlimited shares authorized$15.65
      Offering price per share$15.65
      Redemption proceeds per share$15.65
      • See Notes which are an integral part of the Financial Statements
      Annual Shareholder Report
      37

      Statement of Operations

      Year Ended November 30, 2009

      Investment Income:
      Dividends (including $2,232,461 received from affiliated issuers (Note 5) and net of foreign taxes withheld of $24,801)$4,778,547
      Interest 1,707,239
      Investment income allocated from affiliated partnership (Note 5)$220,339
      Expenses allocated from affiliated partnership (Note 5)(717)
      Net income allocated from affiliated partnership219,622
      TOTAL INCOME AND ALLOCATED EXPENSES6,705,408
      Expenses:
      Investment adviser fee (Note 5)1,452,949
      Administrative personnel and services fee (Note 5)288,851
      Custodian fees44,745
      Transfer and dividend disbursing agent fees and expenses — Class A Shares294,736
      Transfer and dividend disbursing agent fees and expenses — Class B Shares53,513
      Transfer and dividend disbursing agent fees and expenses — Class C Shares50,062
      Transfer and dividend disbursing agent fees and expenses — Class K Shares120,038
      Transfer and dividend disbursing agent fees and expenses — Institutional Shares1,414
      Directors'/Trustees' fees13,278
      Auditing fees26,250
      Legal fees12,052
      Portfolio accounting fees124,846
      Distribution services fee — Class B Shares (Note 5)148,340
      Distribution services fee — Class C Shares (Note 5)170,529
      Distribution services fee — Class K Shares (Note 5)155,255
      Shareholder services fee — Class A Shares (Note 5)324,837
      Shareholder services fee — Class B Shares (Note 5)49,447
      Shareholder services fee — Class C Shares (Note 5)56,289
      Account administration fee — Class A Shares2,771
      Account administration fee — Class C Shares363
      Share registration costs64,011
      Printing and postage106,740
      Insurance premiums4,188
      Miscellaneous5,989
      TOTAL EXPENSES3,571,493
      Annual Shareholder Report
      38

      Statement of Operations — continued
      Waivers, Reimbursements and Expense Reduction:
      Waiver/reimbursement of investment adviser fee (Note 5)$(287,768)
      Waiver of administrative personnel and services fee (Note 5)(57,635)
      Waiver of distribution services fee — Class K Shares (Note 5)(615)
      Reimbursement of transfer and dividend disbursing agent fees and expenses — Class A Shares (Note 5)(103,291)
      Reimbursement of transfer and dividend disbursing agent fees and expenses — Class B Shares (Note 5)(15,588)
      Reimbursement of transfer and dividend disbursing agent fees and expenses — Class C Shares (Note 5)(6,887)
      Fees paid indirectly from directed brokerage arrangements (Note 6)(20,630)
      TOTAL WAIVERS, REIMBURSEMENTS AND EXPENSE REDUCTION$(492,414)
      Net expenses$3,079,079
      Net investment income3,626,329
      Realized and Unrealized Gain (Loss) on Investments, Futures Contracts, Swap Contracts and Foreign Currency Transactions:
      Net realized loss on investments and foreign currency transactions (including realized gain of $26,870 on sales of investments in affiliated issuers) (Note 5)(3,314,633)
      Net realized gain on futures contracts3,825,915
      Net realized gain on swap contracts99,956
      Net realized loss allocated from affiliated partnership (Note 5)(63,219)
      Net change in unrealized depreciation of investments and translation of assets and liabilities in foreign currency37,621,136
      Net change in unrealized appreciation of futures contracts257,311
      Net change in unrealized appreciation of swap contracts57,201
      Net realized and unrealized gain on investments, futures contracts, swap contracts and foreign currency transactions38,483,667
      Change in net assets resulting from operations$42,109,996
      • See Notes which are an integral part of the Financial Statements
      Annual Shareholder Report
      39

      Statement of Changes in Net Assets

      Year Ended November 3020092008
      Increase (Decrease) in Net Assets
      Operations:
      Net investment income$3,626,329$5,553,895
      Net realized gain (loss) on investments including allocation from affiliated partnership, futures contracts, swap contracts and foreign currency transactions548,019(29,685,004)
      Realized gain distributions from affiliated investment company shares — 3,037,079
      Net change in unrealized appreciation/depreciation of investments, futures contracts, swap contracts and translation of assets and liabilities in foreign currency37,935,648(46,314,638)
      CHANGE IN NET ASSETS RESULTING FROM OPERATIONS42,109,996(67,408,668)
      Distributions to Shareholders:
      Distributions from net investment income
      Class A Shares(2,629,338)(4,209,600)
      Class B Shares(267,729)(558,754)
      Class C Shares(285,201)(436,499)
      Class K Shares(384,837)(373,935)
      Institutional Shares(19,202) — 
      Distributions from net realized gain on investments, futures contracts, swap contracts and foreign currency transactions
      Class A Shares — (18,997,795)
      Class B Shares — (3,970,690)
      Class C Shares — (2,615,505)
      Class K Shares — (1,610,535)
      CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS(3,586,307)(32,773,313)
      Annual Shareholder Report
      40

      Statement of Changes in Net Assets — continued
      Year Ended November 3020092008
      Share Transactions:
      Proceeds from sale of shares69,643,36261,467,368
      Proceeds from shares issued in connection with the tax-free transfer of assets from Federated Target ETF Fund 20155,272,582 — 
      Proceeds from shares issued in connection with the tax-free transfer of assets from Federated Target ETF Fund 20258,053,895 — 
      Proceeds from shares issued in connection with the tax-free transfer of assets from Federated Target ETF Fund 20356,951,526 — 
      Net asset value of shares issued to shareholders in payment of distributions declared3,363,17430,823,744
      Cost of shares redeemed(70,213,064)(85,242,261)
      CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS23,071,4757,048,851
      Change in net assets61,595,164(93,133,130)
      Net Assets:
      Beginning of period186,560,466279,693,596
      End of period (including distributions in excess of net investment income of $(56,725) and $(224,475), respectively)$248,155,630$186,560,466
      • See Notes which are an integral part of the Financial Statements
      Annual Shareholder Report
      41

      Notes to Financial Statements

      November 30, 2009

      1. ORGANIZATION

      Federated Stock and Bond Fund (formerly, Federated Stock and Bond Fund, Inc.) (the “Fund”), is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified, open-end management investment company. The Fund offers five classes of shares: Class A Shares, Class B Shares, Class C Shares, Class K Shares and Institutional Shares. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. The financial highlights of the Class A Shares, Class B Shares, Class C Shares and Class K Shares are presented separately. The primary investment objective of the Fund is to provide relative safety of capital with the possibility of long-term growth of capital and income. Consideration is also given to current income.

      Effective June 12, 2009, the Fund began offering Institutional Shares.

      On June 15, 2009, the Fund received assets from Federated Target ETF Fund 2015 (FT2015), Federated Target ETF Fund 2025 (FT2025) and Federated Target ETF Fund 2035 (FT2035) (collectively, “Acquired Funds”) as a result of a tax-free reorganization, as follows:

      Shares of the
      Fund Issued
      Acquired
      Funds Net
      Assets Received
      Unrealized
      Appreciation1
      Net Assets
      of the Fund
      Immediately
      Prior to
      Combination
      Net Assets
      of the Fund
      Immediately
      After
      Combination
      FT2015374,734$5,272,582$244,522
      FT2025572,3368,053,895705,623
      FT2035494,0246,951,526499,642
      TOTAL1,441,094$20,278,003$1,449,787$200,320,350$220,598,353
      1Unrealized appreciation is included in the Acquired Funds Net Assets Received amount shown above.

      2. SIGNIFICANT ACCOUNTING POLICIES

      The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with U.S. generally accepted accounting principles (GAAP).

      Investment Valuation

      In calculating its net asset value (NAV), the Fund generally values investments as follows:

      • Equity securities listed on an exchange or traded through a regulated market system are valued at their last reported sale price or official closing price in their principal exchange or market.
      • Fixed-income securities acquired with remaining maturities greater than 60 days are fair valued using price evaluations provided by a pricing service approved by the Trustees.
      • Fixed-income securities acquired with remaining maturities of 60 days or less are valued at their cost (adjusted for the accretion of any discount or amortization of any premium).
      • Shares of other mutual funds are valued based upon their reported NAVs.
      • Derivative contracts listed on exchanges are valued at their reported settlement or closing price.
      • Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Trustees.
      Annual Shareholder Report
      42

      If the Fund cannot obtain a price or price evaluation from a pricing service for an investment, the Fund may attempt to value the investment based upon the mean of bid and asked quotations or fair value the investment based on price evaluations, from one or more dealers. If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, the Fund uses the fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund could purchase or sell an investment at the price used to calculate the Fund's NAV.

      Fair Valuation and Significant Events Procedures

      The Trustees have authorized the use of pricing services to provide evaluations of the current fair value of certain investments for purposes of calculating the NAV. Factors considered by pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and asked for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for other types of fixed-income securities and OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Trustees.

      The Trustees also have adopted procedures requiring an investment to be priced at its fair value whenever the Adviser determines that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment's value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:

      • With respect to securities traded in foreign markets, significant trends in U.S. equity markets or in the trading of foreign securities index futures or options contracts;
      • With respect to price evaluations of fixed-income securities determined before the close of regular trading on the NYSE, actions by the Federal Reserve Open Market Committee and other significant trends in U.S. fixed-income markets;
      • Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded; and
      • Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, a natural disaster affecting the issuer's operations or regulatory changes or market developments affecting the issuer's industry.

      The Trustees have approved the use of a pricing service to determine the fair value of equity securities traded principally in foreign markets when the Adviser determines that there has been a significant trend in the U.S. equity markets or in index futures trading. For other significant events, the Fund may seek to obtain more current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the Fund will determine the fair value of the investment using another method approved by the Trustees.

      Annual Shareholder Report
      43

      Repurchase Agreements

      It is the policy of the Fund to require the other party to a repurchase agreement to transfer to the Fund's custodian or sub-custodian eligible securities or cash with a market value (after transaction costs) at least equal to the repurchase price to be paid under the repurchase agreement. The eligible securities are transferred to accounts with the custodian or sub-custodian in which the Fund holds a “securities entitlement” and exercises “control” as those terms are defined in the Uniform Commercial Code. The Fund has established procedures for monitoring the market value of the transferred securities and requiring the transfer of additional eligible securities if necessary to equal at least the repurchase price. These procedures also allow the other party to require securities to be transferred from the account to the extent that their market value exceeds the repurchase price or in exchange for other eligible securities of equivalent market value.

      With respect to agreements to repurchase U.S. government securities and cash items, the Fund treats the repurchase agreement as an investment in the underlying securities and not as an obligation of the other party to the repurchase agreement. Other repurchase agreements are treated as obligations of the other party secured by the underlying securities. Nevertheless, the insolvency of the other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause the Fund to receive less than the full repurchase price. Under the terms of the repurchase agreement, any amounts received by the Fund in excess of the repurchase price and related transaction costs must be remitted to the other party.

      The Fund may enter into repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the custodian or sub-custodian for investment companies and other clients advised by the Fund's Adviser and its affiliates. The Fund will participate on a pro rata basis with the other investment companies and clients in its share of the securities transferred under such repurchase agreements and in its share of proceeds from any repurchase or other disposition of such securities.

      Investment Income, Gains and Losses, Expenses and Distributions

      Investment transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Foreign dividends are recorded on the ex-dividend date or when the Fund is informed of the ex-dividend date. Positive or negative inflation adjustments on Treasury Inflation-Protected Securities are included in interest income. Distributions of net investment income are declared and paid quarterly. Non-cash dividends included in dividend income, if any, are recorded at fair value. Investment income, realized and unrealized gains and losses and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that Class A Shares, Class B Shares, Class C Shares, Class K Shares and Institutional Shares may bear distribution services fees, shareholder services fees, account administration fees and certain transfer and dividend disbursing agent fees unique to those classes. The Fund may also invest in Emerging Markets Fixed Income Core Fund (EMCORE), a portfolio of Federated Core Trust II, L.P., which is a limited partnership established under the laws of the state of Delaware. The Fund records daily its proportionate share of income, expenses, realized and unrealized gains and losses from EMCORE. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.

      Annual Shareholder Report
      44

      Premium and Discount Amortization/Paydown Gains and Losses

      All premiums and discounts on fixed-income securities are amortized/accreted for financial statement purposes. Gains and losses realized on principal payment of mortgage-backed securities (paydown gains and losses) are classified as part of investment income.

      Federal Taxes

      It is the Fund's policy to comply with the Subchapter M provision of the Internal Revenue Code (the “Code”) and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary. As of and during the year ended November 30, 2009, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of September 5, 2008, the Fund's domicile and form of organization changed from a Maryland Corporation to a Massachusetts business Trust. As of November 30, 2009, tax years 2006 through 2009 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America, the state of Maryland, the Commonwealth of Massachusetts and the Commonwealth of Pennsylvania.

      The Fund may be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The Fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or gains are earned.

      Other Taxes

      Through September 4, 2008, as an open-end management investment company incorporated in the state of Maryland but domiciled in the Commonwealth of Pennsylvania, the Fund is subject to the Pennsylvania Franchise Tax. This franchise tax is assessed annually on the value of the Fund, as represented by average net assets for the tax year.

      When-Issued and Delayed Delivery Transactions

      The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.

      Swap Contracts

      Swap contracts involve two parties that agree to exchange the returns (or the differential in rates of return) earned or realized on particular predetermined investments, instruments, indices or other measures. The gross returns to be exchanged or “swapped” between parties are generally calculated with respect to a “notional amount” for a predetermined period of time. The Fund may enter into interest rate, total return, credit default, currency and other swap agreements. Risks may arise upon entering into swap agreements from the potential inability of the counterparties to meet the terms of their contract from unanticipated changes in the value of the swap agreement. The Fund uses credit default swaps to manage exposure to a given issuer or sector by either selling protection to increase exposure, or buying protection to reduce exposure. The “buyer” in a credit default swap is obligated to pay the “seller” a periodic stream of payments over the term of the contract provided that no event of default on an underlying reference obligation has occurred. If an event of default occurs, the seller must pay the buyer the full notional value, or the “par value”, of the reference obligation Annual Shareholder Report
      45

      in exchange for the reference obligation. In connection with these agreements, securities may be identified as collateral in accordance with the terms of the respective swap agreements to provide assets of value and recourse in the event of default or bankruptcy/insolvency. Recovery values are assumed by market makers considering either industry standard recovery rates or entity specific factors and considerations until a credit event occurs. If a credit event has occurred, the recovery value is typically determined by a facilitated auction whereby a minimum number of allowable broker bids, together with a specific valuation method, are used to calculate the settlement value. The maximum amount of the payment that may occur, as a result of a credit event payable by the protection seller, is equal to the notional amount of the underlying index or security. The Fund's maximum exposure to loss of the notional value of credit default swaps outstanding at November 30, 2009 is $9,920,000.

      The Fund's maximum risk of loss from counterparty credit risk, either as the protection buyer or as the protection seller, is the fair value of the contract. This risk is mitigated by having a master netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund's exposure to the counterparty.

      Upfront payments received or paid by the Fund will be reflected as an asset or liability on the Statement of Assets and Liabilities. Changes in the value of swap contracts are included in swaps, at value, on the Statement of Assets and Liabilities, and periodic payments are reported as Net realized gain (loss) on swap contracts in the Statement of Operations.

      Swap contracts outstanding at period end are listed after the Fund's Portfolio of Investments.

      Futures Contracts

      The Fund purchases and sells financial futures contracts to manage cash flows, enhance yield and to potentially reduce transaction costs. Upon entering into a financial futures contract with a broker, the Fund is required to deposit in a segregated account a specified amount of cash or U.S. government securities. Futures contracts are valued daily and unrealized gains or losses are recorded in a “variation margin” account. Daily, the Fund receives from or pays to the broker a specified amount of cash based upon changes in the variation margin account. When a contract is closed, the Fund recognizes a realized gain or loss. Futures contracts have market risks, including the risk that the change in the value of the contract may not correlate with the changes in the value of the underlying securities. There is minimal counterparty risk to the Fund since futures are exchange traded and the exchange's clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default.

      Futures contracts outstanding at period end are listed after the Fund's Portfolio of Investments.

      Foreign Exchange Contracts

      The Fund may enter into foreign exchange contracts for the delayed delivery of securities or foreign currency exchange transactions. The Fund may enter into foreign exchange contracts to protect assets against adverse changes in foreign currency exchange rates or exchange control regulations. Purchased contracts are used to acquire exposure to foreign currencies, whereas, contracts to sell are used to hedge the Fund's securities against currency fluctuations. Risks may arise upon entering into these transactions from the potential inability Annual Shareholder Report
      46

      of counterparties to meet the terms of their commitments and from unanticipated movements in security prices or foreign exchange rates. The foreign exchange contracts are adjusted by the daily exchange rate of the underlying currency and any gains or losses are recorded for financial statement purposes as unrealized until the settlement date.

      Foreign exchange contracts outstanding at period end are listed after the Fund's Portfolio of Investments.

      Foreign Currency Translation

      The accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies (FCs) are translated into U.S. dollars based on the rates of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales of securities, income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.

      Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of FCs, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund's books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate.

      Restricted Securities

      The Fund may purchase securities which are considered restricted. Restricted securities are securities that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) are subject to contractual restrictions on public sales. In some cases, when a security cannot be offered for public sale without first being registered, the issuer of the restricted security has agreed to register such securities for resale, at the issuer's expense, either upon demand by the Fund or in connection with another registered offering of the securities. Many such restricted securities may be resold in the secondary market in transactions exempt from registration. Restricted securities may be determined to be liquid under criteria established by the Trustees. The Fund will not incur any registration costs upon such resales. The Fund's restricted securities are valued at the price provided by dealers in the secondary market or, if no market prices are available, at the fair value as determined in accordance with procedures established by and under the general supervision of the Trustees.

      Annual Shareholder Report
      47

      Additional information on restricted securities, excluding securities purchased under Rule 144A, if applicable, that have been deemed liquid by the Trustees, held at November 30, 2009, is as follows:
      SecurityAcquisition DateAcquisition CostMarket Value
      Union Central Life Ins Co, Note, 8.2%, 11/1/20263/31/1999$783,526$704,991

      Additional Disclosure Related to Derivative Instruments

      Fair Value of Derivative Instruments
      AssetLiability
      Statement of
      Assets and
      Liabilities
      Location
      Fair
      Value
      Statement of
      Assets and
      Liabilities
      Location
      Fair
      Value
      Derivatives not accounted for as hedging instruments under ASC Topic 815
      Interest rate contracts — $ — Payable for daily variation margin$105,467*
      Equity contracts —  — Payable for daily variation margin(691,446)*
      Foreign exchange contractsReceivable for foreign exchange contracts664,591Payable for foreign exchange contracts1,037,869
      Credit contractsReceivable for periodic payments from swap contracts19,565swaps, at value32,854
      Total derivatives not accounted for as hedging instruments under ASC Topic 815$684,156$484,744
      *Includes cumulative appreciation/depreciation of futures contracts as reported in the footnotes to the Portfolio of Investments. Only the current day's variation margin is reported within the Statement of Assets and Liabilities.
      Annual Shareholder Report
      48

      The Effect of Derivative Instruments on the Statement of Operations for the Year Ended November 30, 2009
      Amount of Realized Gain or (Loss) on Derivatives Recognized in Income
      Credit
      Default
      Swaps
      FuturesForward
      Currency
      Contracts
      Total
      Interest rate contracts$ — $(190,823)$ — $(190,823)
      Equity contracts — 4,016,738 — 4,016,738
      Foreign exchange contracts —  — (3,212)(3,212)
      Credit contracts99,956 —  — 99,956
      Total$99,956$3,825,915$(3,212)$3,922,659

      Change in Unrealized Appreciation or (Depreciation) on Derivatives
      Recognized in Income
      Credit
      Default
      Swaps
      FuturesForward
      Currency
      Contracts
      Total
      Interest rate contracts$ — $(270,452)$ — $(270,452)
      Equity contracts — 527,763 — 527,763
      Foreign exchange contracts —  — (373,278)(373,278)
      Credit contracts57,201 —  — 57,201
      Total$57,201$257,311$(373,278)$(58,766)

      Other

      The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated.

      Annual Shareholder Report
      49

      3. Shares of beneficial interest

      The following tables summarize share activity:

      Year Ended November 3020092008
      Class A Shares:SharesAmountSharesAmount
      Shares sold1,851,463$25,328,0031,736,691$28,811,635
      Proceeds from shares issued in connection with the tax-free transfer of assets from Federated Target ETF Fund 2015138,7371,950,574 —  — 
      Proceeds from shares issued in connection with the tax-free transfer of assets from Federated Target ETF Fund 2025192,2542,703,126 —  — 
      Proceeds from shares issued in connection with the tax-free transfer of assets from Federated Target ETF Fund 2035184,5242,594,400 —  — 
      Shares issued to shareholders in payment of distributions declared182,9622,452,9021,246,09121,865,220
      Shares redeemed(2,550,336)(34,968,933)(3,205,676)(52,219,023)
      NET CHANGE RESULTING
      FROM CLASS A SHARE TRANSACTIONS
      (396)$60,072(222,894)$(1,542,168)
      Year Ended November 3020092008
      Class B Shares:SharesAmountSharesAmount
      Shares sold274,805$3,808,687253,445$4,287,345
      Shares issued to shareholders in payment of distributions declared19,052250,988242,3134,277,122
      Shares redeemed(656,572)(8,884,783)(914,395)(15,004,715)
      NET CHANGE RESULTING
      FROM CLASS B SHARE TRANSACTIONS
      (362,715)$(4,825,108)(418,637)$(6,440,248)
      Year Ended November 3020092008
      Class C Shares:SharesAmountSharesAmount
      Shares sold1,002,107$13,808,180643,591$10,471,614
      Shares issued to shareholders in payment of distributions declared19,606258,296154,2742,697,569
      Shares redeemed(783,732)(10,601,445)(552,725)(8,864,283)
      NET CHANGE RESULTING
      FROM CLASS C SHARE TRANSACTIONS
      237,981$3,465,031245,140$4,304,900
      Annual Shareholder Report
      50

      Year Ended November 3020092008
      Class K Shares:SharesAmountSharesAmount
      Shares sold1,822,012$25,416,4591,099,593$17,896,774
      Proceeds from shares issued in connection with the tax-free transfer of assets from Federated Target ETF Fund 2015192,9312,716,507 —  — 
      Proceeds from shares issued in connection with the tax-free transfer of assets from Federated Target ETF Fund 2025339,1374,775,071 —  — 
      Proceeds from shares issued in connection with the tax-free transfer of assets from Federated Target ETF Fund 2035269,0743,788,720 —  — 
      Shares issued to shareholders in payment of distributions declared28,544384,790113,6671,983,833
      Shares redeemed(1,080,496)(15,220,214)(572,618)(9,154,240)
      NET CHANGE RESULTING
      FROM CLASS K SHARE TRANSACTIONS
      1,571,202$21,861,333640,642$10,726,367
      Period Ended11/30/20091Year Ended 11/30/2008
      Institutional Shares:SharesAmountSharesAmount
      Shares sold86,196$1,282,033 — $ — 
      Proceeds from shares issued in connection with the tax-free transfer of assets from Federated Target ETF Fund 201543,066605,501 —  — 
      Proceeds from shares issued in connection with the tax-free transfer of assets from Federated Target ETF Fund 202540,945575,698 —  — 
      Proceeds from shares issued in connection with the tax-free transfer of assets from Federated Target ETF Fund 203540,426568,406 —  — 
      Shares issued to shareholders in payment of distributions declared1,07916,198 —  — 
      Shares redeemed(34,334)(537,689) —  — 
      NET CHANGE RESULTING
      FROM INSTITUTIONAL SHARE TRANSACTIONS
      177,378$2,510,147 — $ — 
      NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS1,623,450$23,071,475244,251$7,048,851
      1Reflects operations from June 12, 2009, (date of initial investment) to November 30, 2009.
      Annual Shareholder Report
      51

      4. FEDERAL TAX INFORMATION

      The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. These differences are due in part to differing treatments for foreign currency transactions, reclassification of income for defaulted securities, partnership income reclassifications, swap income reclassifications, expiration of capital loss carryforwards and discount accretion/premium amortization on debt securities.

      For the year ended November 30, 2009, permanent differences identified and reclassified among the components of net assets were as follows:

      Increase (Decrease)
      Paid-In CapitalUndistributed
      Net Investment
      Income (Loss)
      Accumulated
      Net Realized
      Gain (Loss)
      $8,121,591$127,728$(8,249,319)

      Net investment income (loss), net realized gains (losses), and net assets were not affected by this reclassification.

      The tax character of distributions as reported on the Statement of Changes in Net Assets for the years ended November 30, 2009 and 2008, was as follows:

      20092008
      Ordinary income1$3,586,307$15,440,201
      Long-term capital gains$ — $17,333,112
      1For tax purposes, short-term capital gain distributions are considered ordinary income distributions.

      As of November 30, 2009, the components of distributable earnings on a tax basis were as follows:

      Distributions in excess of ordinary income$(82,025)
      Net unrealized appreciation$15,689,996
      Capital loss carryforwards$(32,829,608)

      The difference between book-basis and tax-basis net unrealized appreciation/depreciation is attributable in part to differing treatments for the deferral of losses on wash sales, partnership transactions, defaulted bond interest and discount accretion/premium amortization on debt securities.

      At November 30, 2009, the cost of investments for federal tax purposes was $231,155,224. The net unrealized appreciation of investments for federal tax purposes excluding any unrealized appreciation/depreciation resulting from changes in foreign currency exchange rates, outstanding foreign commitments, futures contracts and swap contracts was $17,643,788. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $20,070,842 and net unrealized depreciation from investments for those securities having an excess of cost over value of $2,427,054.

      Annual Shareholder Report
      52

      At November 30, 2009, the Fund had a capital loss carryforward of $32,829,608 which will reduce the Fund's taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Code and thus will reduce the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income tax. Pursuant to the Code, such capital loss carryforward will expire as follows:
      Expiration YearExpiration Amount
      2010$1,244,627
      2015$1,453,609
      2016$25,710,105
      2017$4,421,267

      As a result of the tax-free transfer of assets from Vintage Balanced Fund, Federated Target ETF Fund 2015, Federated Target ETF Fund 2025 and Federated Target ETF Fund 2035, certain capital loss carryforwards listed above may be limited.

      Capital loss carryforwards of $1,127,965 expired during the year ended November 30, 2009.

      5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

      Investment Adviser Fee

      Federated Global Investment Management Corp. is the Fund's investment adviser (the “Adviser”). The advisory agreement between the Fund and the Adviser provides for an annual fee equal to: (a) a maximum of 0.55% of the average daily net assets of the Fund; and
      (b) 4.50% of the gross income of the Fund, excluding gains or losses. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion. For the year ended November 30, 2009, the Adviser voluntarily waived $271,612 of its fee. For the year ended November 30, 2009, an affiliate of the adviser reimbursed $125,766 of transfer and dividend disbursing agent fees and expenses.

      Certain of the Fund's assets are managed by Federated Investment Management Company (FIMCO) and Federated Equity Management Company of Pennsylvania (FEMCOPA) (the “Sub-Advisers”). Under the terms of a sub-advisory agreement between the Adviser and the Sub-Advisers, the Sub-Advisers receive an allocable portion of the Fund's adviser fee. The fee is paid by the Adviser out of its resources and is not an incremental Fund expense. For the year ended November 30, 2009, FIMCO and FEMCOPA earned fees of $197,451 and
      $590,549, respectively.

      Annual Shareholder Report
      53

      Administrative Fee

      Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FAS is based on the average aggregate daily net assets of certain Federated funds as specified below:

      Administrative FeeAverage Aggregate Daily Net Assets
      of the Federated Funds
      0.150%on the first $5 billion
      0.125%on the next $5 billion
      0.100%on the next $10 billion
      0.075%on assets in excess of $20 billion

      The administrative fee received during any fiscal year shall be at least $150,000 per portfolio and $40,000 per each additional class of Shares. Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. FAS can modify or terminate this voluntary waiver at any time at its sole discretion. For the year ended
      November 30, 2009, the net fee paid to FAS was 0.111% of average daily net assets of the Fund. FAS waived $57,635 of its fee.

      Distribution Services Fee

      The Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund's Class B Shares, Class C Shares and Class K Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses at the following percentages of average daily net assets annually, to compensate FSC:

      Share Class NamePercentage of Average Daily
      Net Assets of Class
      Class B Shares0.75%
      Class C Shares0.75%
      Class K Shares0.50%

      Subject to the terms described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee. FSC can modify or terminate this voluntary waiver at any time at its sole discretion. For the year ended November 30, 2009, FSC voluntarily waived $615 of its fee. When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares. For the year ended November 30, 2009, FSC retained $8,507 of fees paid by the Fund.

      Sales Charges

      Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. For the year ended November 30, 2009, FSC retained $16,165 in sales charges from the sale of Class A Shares. FSC also retained $175 of CDSC relating to redemptions of Class C Shares.

      Annual Shareholder Report
      54

      Shareholder Services Fee

      The Fund may pay fees (Service Fees) up to 0.25% of the average daily net assets of the Fund's Class A Shares, Class B Shares and Class C Shares to financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. Financial intermediaries may include a company affiliated with management of Federated Investors, Inc. A financial intermediary affiliated with management of Federated Investors, Inc. received $1,386 of Service Fees for the year ended November 30, 2009. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for shareholder services fees. This voluntary reimbursement can be modified or terminated at any time. For the year ended November 30, 2009, FSSC did not receive any fees paid by the Fund.

      Interfund Transactions

      During the year ended November 30, 2009, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions complied with Rule 17a-7 under the Act and amounted to $64,273 and
      $26,071, respectively.

      Expense Limitation

      The Adviser and its affiliates (which may include FSC, FAS and FSSC) have voluntarily agreed to waive their fees and/or reimburse expenses so that the total operating expenses (as shown in the financial highlights) paid by the Fund's Class A Shares, Class B Shares, Class C Shares, Class K Shares and Institutional Shares (after the voluntary waivers and reimbursements) will not exceed 1.25%, 2.05%, 2.05%, 1.75% and 1.00%, respectively, through the later of (the “Termination Date”): (a) January 31, 2011; or (b) the date of the Fund's next effective prospectus. While the Adviser and its affiliates currently do not anticipate terminating these arrangements prior to the Termination Date, these arrangements may only be terminated prior to the Termination Date with the agreement of the Trustees.

      General

      Certain Officers and Trustees of the Fund are Officers and Directors or Trustees of the above companies.

      Transactions with Affiliated Companies

      Affiliated holdings are mutual funds which are managed by the Adviser or an affiliate of the Adviser. The Adviser has agreed to reimburse the Fund for certain investment adviser fees as a result of transactions in other affiliated mutual funds. For the year ended November 30, 2009, the Adviser reimbursed $16,156. Transactions with affiliated companies during the year ended November 30, 2009 were as follows:

      AffiliatesBalance of
      Shares Held
      11/30/2008
      Purchases/
      Additions
      Sales/
      Reductions
      Balance of
      Shares Held
      11/30/2009
      ValueDividend
      Income/
      Affiliated
      Investment
      Income
      Emerging Markets Fixed Income Core Fund47,274250,11298,280199,106$4,786,699$220,339
      Annual Shareholder Report
      55

      AffiliatesBalance of
      Shares Held
      11/30/2008
      Purchases/
      Additions
      Sales/
      Reductions
      Balance of
      Shares Held
      11/30/2009
      ValueDividend
      Income/
      Affiliated
      Investment
      Income
      Federated InterContinental Fund, Institutional Shares8,7465589,304 —  — 17,754
      Federated Mortgage Core Portfolio4,526,393624,6294,204,088946,9349,677,6671,296,208
      High Yield Bond Portfolio835,9521,909,967878,5371,867,38211,484,402803,909
      Prime Value Obligations Fund, Institutional Shares4,610,280267,250,160235,765,41836,095,02236,095,022114,590
      TOTAL OF AFFILIATED
      TRANSACTIONS
      10,028,645270,035,426240,955,62739,108,444$62,043,790$2,452,800

      6. EXPENSE Reduction

      The Fund directs portfolio trades to a broker that in turn pays a portion of the Fund's operating expenses. For the year ended November 30, 2009, the Fund's expenses were reduced by $20,630 under these arrangements.

      7. Investment TRANSACTIONS

      Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations (and in-kind contributions), for the year ended November 30, 2009, were as follows:

      Purchases$484,030,920
      Sales$516,527,904

      8. LINE OF CREDIT

      The Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement with PNC Bank. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings are charged interest at a rate offered to the Fund by PNC Bank at the time of the borrowing. As of November 30, 2009, there were no outstanding loans. During the year ended November 30, 2009, the Fund did not utilize the LOC.

      9. INTERFUND LENDING

      Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (SEC), the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of November 30, 2009, there were no outstanding loans. During the year ended November 30, 2009, the program was not utilized.

      Annual Shareholder Report
      56

      10. Legal Proceedings

      Since October 2003, Federated Investors, Inc. and related entities (collectively, Federated) and various Federated funds (Federated Funds) have been named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland. The lawsuits were purportedly filed on behalf of people who purchased, owned and/or redeemed shares of Federated-sponsored mutual funds during specified periods beginning November 1, 1998. The suits are generally similar in alleging that Federated engaged in illegal and improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused financial injury to the mutual fund shareholders. These lawsuits began to be filed shortly after Federated's first public announcement that it had received requests for information on shareholder trading activities in the Federated Funds from the SEC, the Office of the New York State Attorney General (NYAG) and other authorities. In that regard, on November 28, 2005, Federated announced that it had reached final settlements with the SEC and the NYAG with respect to those matters. As Federated previously reported in 2004, it has already paid approximately $8.0 million to certain funds as determined by an independent consultant. As part of these settlements, Federated agreed to pay for the benefit of fund shareholders additional disgorgement and a civil money penalty in the aggregate amount of an additional $72 million. Federated entities have also been named as defendants in several additional lawsuits that are now pending in the United States District Court for the Western District of Pennsylvania, alleging, among other things, excessive advisory and Rule 12b-1 fees. The Board of the Federated Funds retained the law firm of Dickstein Shapiro LLP to represent the Federated Funds in these lawsuits. Federated and the Federated Funds, and their respective counsel have been defending this litigation, and none of the Federated Funds remains a defendant in any of the lawsuits (though some could potentially receive any recoveries as nominal defendants). Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these lawsuits, all of which seek unquantified damages, attorneys' fees and expenses, and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Federated Funds, there can be no assurance that these suits, the ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Federated Fund redemptions, reduced sales of Federated Fund shares or other adverse consequences for the Federated Funds.

      11. Subsequent events

      Management has evaluated subsequent events through January 22, 2010, the date the financial statements were issued, and determined that no events have occurred that require additional disclosure

      12. FEDERAL TAX INFORMATION (UNAUDITED)

      For the fiscal year ended November 30, 2009, 73.53% of total income distributions made by the Fund are qualifying dividends which may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Act of 2003. Complete information is reported in conjunction with the reporting of your distributions on Form 1099-DIV.

      Of the ordinary income distributions made by the Fund during the year ended
      November 30, 2009, 58.06% qualify for the dividend received deduction available to corporate shareholders.

      Annual Shareholder Report
      57

      Report of Independent Registered Public Accounting Firm

      TO THE BOARD OF trusteeS AND THE SHAREHOLDERS OF FEDERATED STOCK AND BOND FUND:

      We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the Federated Stock and Bond Fund (the “Fund”), as of November 30, 2009, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the four-year period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for the periods presented prior to December 1, 2005, were audited by other independent registered public accountants whose report thereon dated January 23, 2006, expressed an unqualified opinion on those statements.

      We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of November 30, 2009 by correspondence with the custodian and transfer agent. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Federated Stock and Bond Fund as of November 30, 2009, and the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the four-year period then ended, in conformity with U.S. generally accepted accounting principles.

      Boston, Massachusetts
      January 22, 2010

      Annual Shareholder Report
      58

      Board of Trustees and Trust Officers

      The Board is responsible for managing the Trust's business affairs and for exercising all the Trust's powers except those reserved for the shareholders. The following tables give information about each Board member and the senior officers of the Fund. Where required, the tables separately list Board members who are “interested persons” of the Fund (i.e., “Interested” Board members) and those who are not (i.e., “Independent” Board members). Unless otherwise noted, the address of each person listed is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222. The address of all Independent Board members listed is 4000 Ericsson Drive, Warrendale, PA 15086-7561; Attention: Mutual Fund Board. As of December 31, 2009, the Trust comprised one portfolio, and the Federated Fund Complex consisted of 43 investment companies (comprising 145 portfolios). Unless otherwise noted, each Officer is elected annually. Unless otherwise noted, each Board member oversees all portfolios in the Federated Fund Complex and serves for an indefinite term. The Fund's Statement of Additional Information includes additional information about Trust Trustees and is available, without charge and upon request, by calling 1-800-341-7400.

      Interested Trustees Background

      Name
      Birth Date
      Positions Held with Trust
      Date Service Began
      Principal Occupation(s) for Past Five Years,
      Other Directorships Held and Previous Position(s)
      John F. Donahue*
      Birth Date: July 28, 1924
      TRUSTEE
      Began serving: December 1956
      Principal Occupations: Director or Trustee of the Federated Fund Complex; Chairman and Director, Federated Investors, Inc.; Chairman of the Federated Fund Complex's Executive Committee.
      Previous Positions: Chairman of the Federated Fund Complex; Trustee, Federated Investment Management Company; Chairman and Director, Federated Investment Counseling.
      J. Christopher Donahue*
      Birth Date: April 11, 1949
      PRESIDENT AND TRUSTEE
      Began serving: November 1998
      Principal Occupations: Principal Executive Officer and President of the Federated Fund Complex; Director or Trustee of some of the Funds in the Federated Fund Complex; President, Chief Executive Officer and Director, Federated Investors, Inc.; Chairman and Trustee, Federated Investment Management Company; Trustee, Federated Investment Counseling; Chairman and Director, Federated Global Investment Management Corp.; Chairman, Federated Equity Management Company of Pennsylvania and Passport Research, Ltd. (investment advisory subsidiary of Federated); Trustee, Federated Shareholder Services Company; Director, Federated Services Company.
      Previous Positions: President, Federated Investment Counseling; President and Chief Executive Officer, Federated Investment Management Company, Federated Global Investment Management Corp. and Passport Research, Ltd.

      *Family relationships and reasons for “interested” status: John F. Donahue is the father of J. Christopher Donahue; both are “interested” due to their beneficial ownership of shares of Federated Investors, Inc. and the positions they hold with Federated and its subsidiaries.
      Annual Shareholder Report

      59

      INDEPENDENT Trustees Background

      Name
      Birth Date
      Positions Held with Trust
      Date Service Began
      Principal Occupation(s) for Past Five Years,
      Other Directorships Held and Previous Position(s)
      John T. Conroy, Jr., Ph.D.
      Birth Date: June 23, 1937
      TRUSTEE
      Began serving: August 1991
      Principal Occupations: Director or Trustee of the Federated Fund Complex; Chairman of the Board, Investment Properties Corporation; Partner or Trustee in private real estate ventures in Southwest Florida; Assistant Professor in Theology, Blessed Edmund Rice School for Pastoral Ministry.
      Previous Positions: President, Investment Properties Corporation; Senior Vice President, John R. Wood and Associates, Inc., Realtors; President, Naples Property Management, Inc. and Northgate Village Development Corporation.
      Nicholas P. Constantakis
      Birth Date: September 3, 1939
      TRUSTEE
      Began serving: November 1998
      Principal Occupation: Director or Trustee of the Federated Fund Complex.
      Other Directorship Held: Director and Chairman of the Audit Committee, Michael Baker Corporation (architecture, engineering and construction services).
      Previous Position: Partner, Andersen Worldwide SC.
      John F. Cunningham
      Birth Date: March 5, 1943
      TRUSTEE
      Began serving: November 1998
      Principal Occupation: Director or Trustee of the Federated Fund Complex.
      Other Directorships Held: Chairman, President and Chief Executive Officer, Cunningham & Co., Inc. (strategic business consulting); Trustee Associate, Boston College.
      Previous Positions: Director, Redgate Communications and EMC Corporation (computer storage systems); Chairman of the Board and Chief Executive Officer, Computer Consoles, Inc.; President and Chief Operating Officer, Wang Laboratories; Director, First National Bank of Boston; Director, Apollo Computer, Inc.
      Maureen Lally-Green
      Birth Date: July 5, 1949
      TRUSTEE
      Began serving: August 2009
      Principal Occupations: Director or Trustee of the Federated Fund Complex; Director, Office of Church Relations, Diocese of Pittsburgh; Adjunct Professor of Law, Duquesne University School of Law.
      Other Directorships Held: Director, Auberle; Trustee St. Francis University; Director, Ireland Institute of Pittsburgh; Director, UPMC Mercy Hospital; Regent, St. Vincent Seminary; Director, Epilepsy Foundation of Western and Central Pennsylvania; Director, Saint Thomas More Society, Allegheny County; Director, Carlow University.
      Previous Position: Pennsylvania Superior Court Judge.
      Annual Shareholder Report
      60

      Name
      Birth Date
      Positions Held with Trust
      Date Service Began
      Principal Occupation(s) for Past Five Years,
      Other Directorships Held and Previous Position(s)
      Peter E. Madden
      Birth Date: March 16, 1942
      TRUSTEE
      Began serving: August 1991
      Principal Occupation: Director or Trustee, and Chairman of the Board of Directors or Trustees, of the Federated Fund Complex.
      Other Directorship Held: Board of Overseers, Babson College.
      Previous Positions: Representative, Commonwealth of Massachusetts General Court; President, Chief Operating Officer and Director, State Street Bank and Trust Company and State Street Corporation (retired); Director, VISA USA and VISA International; Chairman and Director, Massachusetts Bankers Association; Director, Depository Trust Corporation; Director, The Boston Stock Exchange.
      Charles F. Mansfield, Jr.
      Birth Date: April 10, 1945
      TRUSTEE
      Began serving: November 1998
      Principal Occupations: Director or Trustee and Chairman of the Audit Committee of the Federated Fund Complex; Management Consultant.
      Previous Positions: Chief Executive Officer, PBTC International Bank; Partner, Arthur Young & Company (now Ernst & Young LLP); Chief Financial Officer of Retail Banking Sector, Chase Manhattan Bank; Senior Vice President, HSBC Bank USA (formerly, Marine Midland Bank); Vice President, Citibank; Assistant Professor of Banking and Finance, Frank G. Zarb School of Business, Hofstra University; Executive Vice President DVC Group, Inc. (marketing, communications and technology).
      R. James Nicholson
      Birth Date: February 4, 1938
      TRUSTEE
      Began serving: January 2008
      Principal Occupations: Director or Trustee of the Federated Fund Complex; Senior Counsel, Brownstein Hyatt Farber Schrek, P.C.; Former Secretary of the U.S. Dept. of Veterans Affairs; Former U.S. Ambassador to the Holy See; Former Chairman of the Republican National Committee.
      Other Directorships Held: Director, Horatio Alger Association; Director, The Daniels Fund.
      Previous Positions: Colonel, U.S. Army Reserve; Partner, Calkins, Kramer, Grimshaw and Harring, P.C.; General Counsel, Colorado Association of Housing and Building; Chairman and CEO, Nicholson Enterprises, Inc. (real estate holding company); Chairman and CEO, Renaissance Homes of Colorado.
      Thomas M. O'Neill
      Birth Date: June 14, 1951
      TRUSTEE
      Began serving: October 2006
      Principal Occupations: Director or Trustee of the Federated Fund Complex; Sole Proprietor, Navigator Management Company (investment and strategic consulting).
      Other Directorships Held: Board of Overseers, Children's Hospital of Boston; Visiting Committee on Athletics, Harvard College.
      Previous Positions: Chief Executive Officer and President, Managing Director and Chief Investment Officer, Fleet Investment Advisors; President and Chief Executive Officer, Aeltus Investment Management, Inc.; General Partner, Hellman, Jordan Management Co., Boston, MA; Chief Investment Officer, The Putnam Companies, Boston, MA; Credit Analyst and Lending Officer, Fleet Bank; Director and Consultant, EZE Castle Software (investment order management software); Director, Midway Pacific (lumber).
      Annual Shareholder Report
      61

      Name
      Birth Date
      Positions Held with Trust
      Date Service Began
      Principal Occupation(s) for Past Five Years,
      Other Directorships Held and Previous Position(s)
      John S. Walsh
      Birth Date: November 28, 1957
      TRUSTEE
      Began serving: November 1998
      Principal Occupations: Director or Trustee of the Federated Fund Complex; President and Director, Heat Wagon, Inc. (manufacturer of construction temporary heaters); President and Director, Manufacturers Products, Inc. (distributor of portable construction heaters); President, Portable Heater Parts, a division of Manufacturers Products, Inc.
      Previous Position: Vice President, Walsh & Kelly, Inc.
      James F. Will
      Birth Date: October 12, 1938
      TRUSTEE
      Began serving: April 2006
      Principal Occupations: Director or Trustee of the Federated Fund Complex; formerly, Vice Chancellor and President, Saint Vincent College.
      Other Directorships Held: Trustee, Saint Vincent College; Alleghany Corporation.
      Previous Positions: Chairman, President and Chief Executive Officer, Armco, Inc.; President and Chief Executive Officer, Cyclops Industries; President and Chief Operating Officer, Kaiser Steel Corporation.

      OFFICERS

      Name
      Birth Date
      Address
      Positions Held with Trust
      Date Service Began
      Principal Occupation(s) for Past Five Years
      and Previous Position(s)
      John W. McGonigle
      Birth Date: October 26, 1938
      EXECUTIVE VICE PRESIDENT AND SECRETARY
      Began serving: September 1969
      Principal Occupations: Executive Vice President and Secretary of the Federated Fund Complex; Vice Chairman, Executive Vice President, Secretary and Director, Federated Investors, Inc.
      Previous Positions: Trustee, Federated Investment Management Company and Federated Investment Counseling; Director, Federated Global Investment Management Corp., Federated Services Company and Federated Securities Corp.
      Richard A. Novak
      Birth Date: December 25, 1963
      TREASURER
      Began serving: January 2006
      Principal Occupations: Principal Financial Officer and Treasurer of the Federated Fund Complex; Senior Vice President, Federated Administrative Services; Financial and Operations Principal for Federated Securities Corp., Edgewood Services, Inc. and Southpointe Distribution Services, Inc.
      Previous Positions: Controller of Federated Investors, Inc.; Vice President, Finance of Federated Services Company; held various financial management positions within The Mercy Hospital of Pittsburgh; Auditor, Arthur Andersen & Co.
      Richard B. Fisher
      Birth Date: May 17, 1923
      VICE PRESIDENT
      Began serving: May 1976
      Principal Occupations: Vice Chairman or Vice President of some of the Funds in the Federated Fund Complex; Vice Chairman, Federated Investors, Inc.; Chairman, Federated Securities Corp.
      Previous Positions: President and Director or Trustee of some of the Funds in the Federated Fund Complex; Executive Vice President, Federated Investors, Inc.; Director and Chief Executive Officer, Federated Securities Corp.
      Annual Shareholder Report
      62

      Name
      Birth Date
      Address
      Positions Held with Trust
      Date Service Began
      Principal Occupation(s) for Past Five Years
      and Previous Position(s)
      Brian P. Bouda
      Birth Date: February 28, 1947
      CHIEF COMPLIANCE OFFICER AND SENIOR VICE PRESIDENT
      Began serving: August 2004
      Principal Occupations: Senior Vice President and Chief Compliance Officer of the Federated Fund Complex; Vice President and Chief Compliance Officer of Federated Investors, Inc. and Chief Compliance Officer of its subsidiaries. Mr. Bouda joined Federated in 1999 and is a member of the American Bar Association and the State Bar Association of Wisconsin.
      Stephen F. Auth
      Birth Date: September 3, 1956
      450 Lexington Avenue
      Suite 3700
      New York, NY 10017-3943
      CHIEF INVESTMENT OFFICER
      Began serving: November 2002
      Principal Occupations: Mr. Auth is Chief Investment Officer of this Fund and various other Funds in the Federated Fund Complex; Executive Vice President, Federated Investment Counseling, Federated Global Investment Management Corp. and Federated Equity Management Company of Pennsylvania.
      Previous Positions: Executive Vice President, Federated Investment Management Company, and Passport Research, Ltd. (investment advisory subsidiary of Federated); Senior Vice President, Global Portfolio Management Services Division; Senior Vice President, Federated Investment Management Company and Passport Research, Ltd.; Senior Managing Director and Portfolio Manager, Prudential Investments.

      Annual Shareholder Report

      63

      Evaluation and Approval of Advisory Contract - May 2009

      Federated Stock and Bond Fund (the “Fund”)

      The Fund's Board reviewed the Fund's investment advisory and subadvisory contracts at meetings held in May 2009. The Board's decision regarding these contracts reflects the exercise of its business judgment on whether to continue the existing arrangements.

      In this connection, the Federated funds' Board had previously appointed a Senior Officer, whose duties include specified responsibilities relating to the process by which advisory fees are to be charged to a Federated fund. The Senior Officer has the authority to retain consultants, experts, or staff as may be reasonably necessary to assist in the performance of his duties, reports directly to the Board, and may be terminated only with the approval of a majority of the independent members of the Board. The Senior Officer prepared and furnished to the Board an independent, written evaluation that covered topics discussed below. The Board considered that evaluation, along with other information, in deciding to approve the advisory and subadvisory contracts.

      During its review of these contracts, the Board considered compensation and benefits received by the Adviser and subadviser. This included the fees received for services provided to the Fund by other entities in the Federated organization and research services received by the Adviser from brokers that execute Federated fund trades, as well as advisory fees. The Board is also familiar with and considered judicial decisions concerning allegedly excessive investment advisory fees, which have indicated that the following factors may be relevant to an Adviser's fiduciary duty with respect to its receipt of compensation from a fund: the nature and quality of the services provided by the Adviser, including the performance of the fund; the Adviser's cost of providing the services; the extent to which the Adviser may realize “economies of scale” as a fund grows larger; any indirect benefits that may accrue to the Adviser and its affiliates as a result of the Adviser's relationship with a fund; performance and expenses of comparable funds; and the extent to which the independent Board members are fully informed about all facts the Board deems relevant bearing on the Adviser's services and fees. The Board further considered management fees (including any components thereof) charged to institutional and other clients of the Adviser and subadviser for what might be viewed as like services, and the cost to the Adviser and its affiliates of supplying services pursuant to the management fee agreements, excluding any intra-corporate profit and profit margins of the Adviser and its affiliates for supplying such services. The Board was aware of these factors and was guided by them in its review of the Fund's advisory and subadvisory contracts to the extent it considered them to be appropriate and relevant, as discussed further below.

      Annual Shareholder Report
      64

      The Board considered and weighed these circumstances in light of its substantial accumulated experience in governing the Fund and working with Federated on matters relating to the Federated funds, and was assisted in its deliberations by independent legal counsel. Throughout the year, the Board has requested and received substantial and detailed information about the Fund and the Federated organization that was in addition to the extensive materials that comprise and accompany the Senior Officer's evaluation. Federated provided much of this information at each regular meeting of the Board, and furnished additional reports in connection with the particular meeting at which the Board's formal review of the advisory and subadvisory contracts occurred. Between regularly scheduled meetings, the Board also received information on particular matters as the need arose. Thus, the Board's consideration of the advisory and subadvisory contracts included review of the Senior Officer's evaluation, accompanying data and additional reports covering such matters as: the Adviser's and subadviser's investment philosophy, revenue, profitability, personnel and processes; investment and operating strategies; the Fund's short- and long-term performance (in absolute terms, both on a gross basis and net of expenses, as well as in relationship to its particular investment program and certain competitor or “peer group” funds and/or other benchmarks, as appropriate), and comments on the reasons for performance; the Fund's investment objectives; the Fund's expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for contractual or voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities (if any); and the nature, quality and extent of the advisory and other services provided to the Fund by the Adviser and its affiliates. The Board also considered the preferences and expectations of Fund shareholders and their relative sophistication; the continuing state of competition in the mutual fund industry and market practices; the range of comparable fees for similar funds in the mutual fund industry; the Fund's relationship to the Federated family of funds which include a comprehensive array of funds with different investment objectives, policies and strategies which are available for exchange without the incurrence of additional sales charges; compliance and audit reports concerning the Federated funds and the Federated companies that service them (including communications from regulatory agencies), as well as Federated's responses to any issues raised therein; and relevant developments in the mutual fund industry and how the Federated funds and/or Federated are responding to them. The Board's evaluation process is evolutionary. The criteria considered and the emphasis placed on relevant criteria change in recognition of changing circumstances in the mutual fund marketplace. Annual Shareholder Report
      65

      With respect to the Fund's performance and expenses in particular, the Board has found the use of comparisons to other mutual funds with comparable investment programs to be particularly useful, given the high degree of competition in the mutual fund business. The Board focused on comparisons with other similar mutual funds more heavily than non-mutual fund products or services because it is believed that they are more relevant. For example, other mutual funds are the products most like the Fund, they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle in fact chosen and maintained by the Fund's investors. The range of their fees and expenses therefore appears to be a generally reliable indication of what consumers have found to be reasonable in the precise marketplace in which the Fund competes. The Fund's ability to deliver competitive performance when compared to its peer group was a useful indicator of how the Adviser is executing the Fund's investment program, which in turn assisted the Board in reaching a conclusion that the nature, extent, and quality of the Adviser's investment management services were such as to warrant continuation of the advisory contract. In this regard, the Senior Officer has reviewed Federated's fees for providing advisory services to products outside the Federated family of funds (e.g., institutional and separate accounts). He concluded that mutual funds and institutional accounts are inherently different products. Those differences include, but are not limited to, different types of targeted investors; being subject to different laws and regulations; different legal structures; different average account sizes; different associated costs; different portfolio management techniques made necessary by different cash flows; and portfolio manager time spent in review of securities pricing. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund advisory contracts.

      The Senior Officer reviewed reports compiled by Federated, using data supplied by independent fund ranking organizations, regarding the performance of, and fees charged by, other mutual funds, noting his view that comparisons to fund peer groups are highly important in judging the reasonableness of proposed fees.

      For the one-year, three-year and five-year periods covered by the report, the Fund's performance was above the median of the relevant peer group.

      The Board also received financial information about Federated, including reports on the compensation and benefits Federated derived from its relationships with the Federated funds. These reports covered not only the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds' administrator). The reports also discussed any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades. In addition, the Board considered the fact that, in order for a fund to be competitive in the marketplace, Federated and its affiliates frequently waived fees and/or Annual Shareholder Report
      66

      reimbursed expenses and have disclosed to fund investors and/or indicated to the Board their intention to do so in the future, where appropriate. Moreover, the Board receives regular reports regarding the institution or elimination of these voluntary waivers.

      Federated furnished reports, requested by the Senior Officer, that reported revenues on a fund-by-fund basis and made estimates of the allocation of expenses on a fund-by-fund basis, using allocation methodologies specified by the Senior Officer. The Senior Officer noted that, although they may apply consistent allocation processes, the inherent difficulties in allocating costs (and the unavoidable arbitrary aspects of that exercise) and the lack of consensus on how to allocate those costs may render such allocation reports unreliable. The allocation reports were considered in the analysis by the Board but were determined to be of limited use.

      The Board and the Senior Officer also reviewed a report compiled by Federated comparing profitability information for Federated to other publicly held fund management companies. In this regard, the Senior Officer noted the limited availability of such information, but nonetheless concluded that Federated's profit margins did not appear to be excessive and the Board agreed.

      The Senior Officer's evaluation also discussed the notion of possible realization of “economies of scale” as a fund grows larger. The Board considered in this regard that the Adviser has made significant and long-term investments in areas that support all of the Federated funds, such as personnel and processes for the portfolio management, compliance, and risk management functions; and systems technology; and that the benefits of these efforts (as well as any economies, should they exist) were likely to be enjoyed by the fund complex as a whole. Finally, the Board also noted the absence of any applicable regulatory or industry guidelines on this subject, which (as discussed in the Senior Officer's evaluation) is compounded by the lack of any common industry practice or general pattern with respect to structuring fund advisory fees with “breakpoints” that serve to reduce the fee as the fund attains a certain size. The Senior Officer did not recommend institution of breakpoints in pricing Federated's fund advisory services at this time.

      It was noted in the materials for the Board meeting that for the period covered by the report, the Fund's investment advisory fee, after waivers and expense reimbursements, if any, was above the median of the relevant peer group. The Board reviewed the fees and other expenses of the Fund with the Adviser and was satisfied that the overall expense structure of the Fund remained competitive. The Board will continue to monitor advisory fees and other expenses borne by the Fund.

      The Senior Officer's evaluation noted his belief that the information and observations contained in his evaluation supported a finding that the proposed management fees are reasonable, and that Federated appeared to provide appropriate administrative services to the Fund for the fees paid. Under these Annual Shareholder Report
      67

      circumstances, no changes were recommended to, and no objection was raised to, the continuation of the Fund's advisory and subadvisory contracts. The Board concluded that the nature, quality and scope of services provided the Fund by the Adviser and its affiliates were satisfactory.

      In its decision to continue an existing investment advisory contract, the Board was mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew an advisory contract. In particular, the Board recognized that many shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and with the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's approval of the advisory contract reflected the fact that it is the shareholders who have effectively selected the Adviser by virtue of having invested in the Fund.

      The Board based its decision to approve the advisory and subadvisory contracts on the totality of the circumstances and relevant factors and with a view to past and future long-term considerations. Not all of the factors and considerations identified above were necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.

      Annual Shareholder Report
      68

      Voting Proxies on Fund Portfolio Securities

      A description of the policies and procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. A report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available from Federated's Web site at FederatedInvestors.com. To access this information from the “Products” section of the Web site, click on the “Prospectuses and Regulatory Reports” link under “Related Information,” then select the appropriate link opposite the name of the Fund; or select the name of the Fund and from the Fund's page, click on the “Prospectuses and Regulatory Reports” link. Form N-PX filings are also available at the SEC's Web site at www.sec.gov.

      Quarterly Portfolio Schedule

      The Fund files with the SEC a complete schedule of its portfolio holdings, as of the close of the first and third quarters of its fiscal year, on “Form N-Q.” These filings are available on the SEC's Web site at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. (Call 1-800-SEC-0330 for information on the operation of the Public Reference Room.) You may also access this information from the “Products” section of Federated's Web site at FederatedInvestors.com by clicking on “Portfolio Holdings” under “Related Information,” then selecting the appropriate link opposite the name of the Fund; or select the name of the Fund and from the Fund's page, click on the “Portfolio Holdings” link.

      Annual Shareholder Report
      69

      Mutual funds are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal.

      This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund's Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.

      Federated Stock and Bond Fund
      Federated Investors Funds
      4000 Ericsson Drive
      Warrendale, PA 15086-7561

      Contact us at FederatedInvestors.com
      or call 1-800-341-7400.

      Federated Securities Corp., Distributor

      Cusip 313911505

      Q450123 (1/10)

      Federated is a registered mark of Federated Investors, Inc.
      2010 Federated Investors, Inc.


      Item 2.                      Code of Ethics

      (a) As of the end of the period covered by this report, the registrant has adopted a code of ethics (the "Section 406 Standards for Investment Companies - Ethical Standards for Principal Executive and Financial Officers") that applies to the registrant's Principal Executive Officer and Principal Financial Officer; the registrant's Principal Financial Officer also serves as the Principal Accounting Officer.
       
      (c) Not Applicable
       
      (d) Not Applicable
       
      (e) Not Applicable
       
      (f)(3) The registrant hereby undertakes to provide any person, without charge, upon request, a copy of the code of ethics.  To request a copy of the code of ethics, contact the registrant at 1-800-341-7400, and ask for a copy of the Section 406 Standards for Investment Companies - Ethical Standards for Principal Executive and Financial Officers.
       
       
      Item 3. Audit Committee Financial Expert
       
       
      The registrant's Board has determined that each of the following members of the Board's Audit Committee is an “audit committee financial expert,” and is "independent," for purposes of this Item:   Nicholas P. Constantakis, Charles F. Mansfield, Jr. and Thomas M. O’Neill.
       

      Item 4.                      Principal Accountant Fees and Services

      (a)                      Audit Fees billed to the registrant for the two most recent fiscal years:
       
      Fiscal year ended 2009 - $26,250
       
      Fiscal year ended 2008 - $26,250
       

       
      (b)                      Audit-Related Fees billed to the registrant for the two most recent fiscal years:
       
      Fiscal year ended 2009 - $31
       
      Fiscal year ended 2008 - $0
       
      Audit Committee Meeting.
       

       
      Amount requiring approval of the registrant’s audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $6,664 and $0 respectively.  Fiscal year ended 2009 - Audit consent fee for N-14 merger document.
       

       
      (c)                       Tax Fees billed to the registrant for the two most recent fiscal years:
       
      Fiscal year ended 2009 - $0
       
      Fiscal year ended 2008 - $0
       
      Amount requiring approval of the registrant’s audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0 respectively.
       

       

       
      (d)                      All Other Fees billed to the registrant for the two most recent fiscal years:
       
      Fiscal year ended 2009 - $0
       
      Fiscal year ended 2008 - $0
       
      Amount requiring approval of the registrant’s audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $3,479 respectively.  Fiscal year ended 2008 – Discussions related to accounting for REMICS.
       

       
      (e)(1)                      Audit Committee Policies regarding Pre-approval of Services.
       
      The Audit Committee is required to pre-approve audit and non-audit services performed by the independent auditor in order to assure that the provision of such services do not impair the auditor’s independence.  Unless a type of service to be provided by the independent auditor has received general pre-approval, it will require specific pre-approval by the Audit Committee.  Any proposed services exceeding pre-approved cost levels will require specific pre-approval by the Audit Committee.
       
      Certain services have the general pre-approval of the Audit Committee.  The term of the general pre-approval is 12 months from the date of pre-approval, unless the Audit Committee specifically provides for a different period.  The Audit Committee will annually review the services that may be provided by the independent auditor without obtaining specific pre-approval from the Audit Committee and may grant general pre-approval for such services.  The Audit Committee will revise the list of general pre-approved services from time to time, based on subsequent determinations.  The Audit Committee will not delegate its responsibilities to pre-approve services performed by the independent auditor to management.
       
      The Audit Committee has delegated pre-approval authority to its Chairman.  The Chairman will report any pre-approval decisions to the Audit Committee at its next scheduled meeting.  The Committee will designate another member with such pre-approval authority when the Chairman is unavailable.
       

       
      AUDIT SERVICES
       
      The annual Audit services engagement terms and fees will be subject to the specific pre-approval of the Audit Committee.  The Audit Committee must approve any changes in terms, conditions and fees resulting from changes in audit scope, registered investment company (RIC) structure or other matters.
       
      In addition to the annual Audit services engagement specifically approved by the Audit Committee, the Audit Committee may grant general pre-approval for other Audit Services, which are those services that only the independent auditor reasonably can provide.  The Audit Committee has pre-approved certain Audit services, all other Audit services must be specifically pre-approved by the Audit Committee.
       

       
      AUDIT-RELATED SERVICES
       
      Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements or that are traditionally performed by the independent auditor.  The Audit Committee believes that the provision of Audit-related services does not impair the independence of the auditor, and has pre-approved certain Audit-related services, all other Audit-related services must be specifically pre-approved by the Audit Committee.
       

       
      TAX SERVICES
       
      The Audit Committee believes that the independent auditor can provide Tax services to the Company such as tax compliance, tax planning and tax advice without impairing the auditor’s independence.  However, the Audit Committee will not permit the retention of the independent auditor in connection with a transaction initially recommended by the independent auditor, the purpose of which may be tax avoidance and the tax treatment of which may not be supported in the Internal Revenue Code and related regulations.  The Audit Committee has pre-approved certain Tax services, all Tax services involving large and complex transactions must be specifically pre-approved by the Audit Committee.
       

       
      ALL OTHER SERVICES
       
      With respect to the provision of services other than audit, review or attest services the pre-approval requirement is waived if:
       

       
      (1)  
      The aggregate amount of all such services provided constitutes no more than five percent of the total amount of revenues paid by the registrant, the registrant’s adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant to its accountant during the fiscal year in which the services are provided;
      (2)  
      Such services were not recognized by the registrant, the registrant’s adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant  at the time of the engagement to be non-audit services; and
      (3)  
      Such services are promptly brought to the attention of the Audit Committee of the issuer and approved prior to the completion of the audit by the Audit Committee or by one or more members of the Audit Committee who are members of the board of directors to whom authority to grant such approvals has been delegated by the Audit Committee.

       
      The Audit Committee may grant general pre-approval to those permissible non-audit services classified as All Other services that it believes are routine and recurring services, and would not impair the independence of the auditor.
       

       
      The SEC’s rules and relevant guidance should be consulted to determine the precise definitions of prohibited non-audit services and the applicability of exceptions to certain of the prohibitions.
       

       
      PRE-APPROVAL FEE LEVELS
       
      Pre-approval fee levels for all services to be provided by the independent auditor will be established annually by the Audit Committee.  Any proposed services exceeding these levels will require specific pre-approval by the Audit Committee.
       

       
      PROCEDURES
       
      Requests or applications to provide services that require specific approval by the Audit Committee will be submitted to the Audit Committee by both the independent auditor and the Principal Accounting Officer and/or Internal Auditor, and must include a joint statement as to whether, in their view, the request or application is consistent with the SEC’s rules on auditor independence.
       

       

       
      (e)(2)                      Percentage of services identified in items 4(b) through 4(d) that were approved by the registrants audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X:
       
      4(b)
       
      Fiscal year ended 2009– 0%
       
      Fiscal year ended 2008- 0%
       
      Percentage of services provided to the registrants investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were approved by the registrants audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, 0% and 0% respectively.
       

       
      4(c)
       
      Fiscal year ended 2009– 0%
       
      Fiscal year ended 2008– 0%
       
      Percentage of services provided to the registrants investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were approved by the registrants audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, 0% and 0% respectively.
       

       
      4(d)
       
      Fiscal year ended 2009– 0%
       
      Fiscal year ended 2008– 0%
       
      Percentage of services provided to the registrants investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were approved by the registrants audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, 0% and 0% respectively.
       

       
      (f)  
      NA

       
      (g)  
      Non-Audit Fees billed to the registrant, the registrant’s investment adviser, and certain entities controlling, controlled by or under common control with the investment adviser:
      Fiscal year ended 2009- $31,541
       
      Fiscal year ended 2008- $150,935
       

       
      (h)                      The registrant’s Audit Committee has considered that the provision of non-audit services that were rendered to the registrant’s adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
       


      Item 5.                      Audit Committee of Listed Registrants

      Not Applicable

      Item 6.                      Schedule of Investments

      Not Applicable

      Item 7.
      Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies

       
      Not Applicable

      Item 8.
      Portfolio Managers of Closed-End Management Investment Companies

       
      Not Applicable

      Item 9.
      Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers

       
      Not Applicable

      Item 10.                      Submission of Matters to a Vote of Security Holders

      Not Applicable

      Item 11.                                Controls and Procedures

      (a) The registrant’s President and Treasurer have concluded that the
      registrant’s disclosure controls and procedures (as defined in rule 30a-3(c) under the Act) are effective in design and operation and are sufficient to form the basis of the certifications required by Rule 30a-(2) under the Act, based on their evaluation of these disclosure controls and procedures within 90 days of the filing date of this report on Form N-CSR.

      (b) There were no changes in the registrant’s internal control over financial reporting (as defined in rule 30a-3(d) under the Act) during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

      Item 12.                                Exhibits













      SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

      Registrant
      Federated Stock and Bond Fund
         
      By
      /S/ Richard A. Novak
       
      Richard A. Novak
       
      Principal Financial Officer
      Date
      January 22, 2010
         
         
      Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
         
         
      By
      /S/ J. Christopher Donahue
       
      J. Christopher Donahue
       
      Principal Executive Officer
      Date
      January 22, 2010
         
         
      By
      /S/ Richard A. Novak
       
      Richard A. Novak
       
      Principal Financial Officer
      Date
      January 22, 2010